Legal Question in Business Law in California

Re: Protection for loan repayment

Filing a UCC-1 form is done to "perfect a security interest." It's equivalent to recording a deed to show to the world that you are the grantee/owner of Blackacre.

You don't create a security interest by filing a UCC-1 any more than you make yourself the owner of Blackacre by recording a deed. It is only a means of giving notice of a pre-existing fact.

Whether you can lawfully and with effect file a UCC-1 at this time depends upon whether you were given a security interest at the time of the loan, or upon any subsequent modification of the loan terms. Does the promissory note or any collateral document contain a pledge of personal property, such as the borrower's membership interest in the LLC? Of course, pledging the LLC's property would be to no avail, because it belongs to the LLC, and not the borrower.

Creditors can't make up security interests after the fact. There has to be a term somewhere in the loan agreement saying "Repayment is secured by..." or words to that effect. Professional lenders, banks, etc. use a separate Security Agreement, sometimes supported by a personal guarantee if the loan is made to an entity.