Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

UCC-1 Statement

What it is:

A UCC-1 statement is a written list and description of assets that serve as collateral for a loan.
 

How it works (Example):

Let's say Company XYZ is a restaurant chain. It borrows $5 million from Bank ABC, which requires Company XYZ to pledge all of its kitchen equipment as collateral.

In order to record the fact that the kitchen equipment is Bank ABC's collateral, the bank files UCC-1 statements with the Secretary of State in the state in which they do business.

UCC stands for Uniform Commercial Code.

Why it Matters:

A UCC-1 statement is a recorded security interest in an asset. It ensures that everyone knows that the asset listed on the UCC-1 is collateral, and thus it prevents the sale of collateral without the lender's consent.