Legal Question in Business Law in New York

I have clients who are designers so I'm pretty familiar with the factoring business. I'm going to be very direct with you. The question that you're asking is a pretty fundamental issue in your business and I'm concerned that if you aren't clear on the answer to this issue, you may be missing other "smaller" issues that could really impact your company (i.e. your ability to get paid).

Please, please, please find yourself an attorney who is familiar with UCC issues. You need to find a "teaching" lawyer that shares information without charging you for every small question that you ask (like the one you asked in this forum).

If you have an attorney and you're still unclear about these kinds of issues, you should go back to your lawyer and really ask him/her how you can change your arrangement so that you can get up to speed on some of the bigger, fundamental issues in your business. I used this approach when I first hired an accountant because I wanted to actually LEARN about accounting. I didn't want someone who would just take my business info and return documents to me.

In the same way, you don't want to just factor accounts with UCC agreements where you don't understand how all the clauses fit together. It just isn't a good idea.

Just my 2 cents.

And I'm a little unclear on your question regarding your "protection or course of action" if the seller can't "execute other secured borrowings"? If you still need an answer to this question, feel free to contact me off site via email.

Best,

Christopher Moye, Esq.

Q. In this case, do I need a UCC1 filing to protect my security interest in the receivable that I purchased?

A. Yes. Absolutely.

Q. If my seller goes bankrupt and another blanket lien holder, who filed a UCC1, have priority rights over the seller's receivables that I monetized for the seller?

A. If another entity filed a UCC1 before you filed your UCC1, that other entity would have a first position lien, and you would have a second position lien. That is why I always advise my clients to conduct a UCC lien search before filing.

Q. What would be my protection or another course of action if the seller does not allow me to file a UCC1 on grounds that he will not be able to execute other secured borrowings?

A. You may have the promisor sign a personal guarantee. You may take other security such as a real estate (mortgage). You may have the promisor sign a confession of judgment (that lasts for 3 years). You may waive your right to security and just accept the promise of payment. Then, upon default, you would have to sue for breach of contract.

Mike.