While lenders focus on the importance of ensuring that UCC Financing Statements are filed and security interests are properly perfected, it is important to remain mindful of the possibility that borrowers may undergo business changes that could compromise the lender’s perfected lien status including, but not limited to, name changes.

Pursuant to UCC §§ 9-502 and 9-503 there are strict requirements for proper documentation of a borrower’s name listed on the UCC Financing Statement. Even if the borrower’s name is completely accurate on the filed UCC Financing Statement, a subsequent change in the borrower’s name can render the UCC Financing Statement “seriously misleading” (UCC § 9-507(c)).

What actions should lenders take?

Within four months of a filed name change, a secured party must amend its UCC Financing Statement to reflect the borrower’s new name and preserve the perfection and priority (UCC § 9-507(c)).

Pursuant to UCC Article 9, a lender’s failure to maintain the proper UCC filing could result in a challenge to the lender’s lien priority upon liquidation of the collateral. Such challenges to a lender’s lien priority could result in a repair or denial of the lender’s SBA guaranty. As such, it is good practice for lenders to include a provision within the loan agreement requiring borrowers to immediately notify the lender of any business name change. Additionally, it is recommended that lenders build procedures to periodically monitor for potential name changes. Utilizing internal systems and/or service vendors to assist in monitoring UCC filing records throughout the life of a loan can be a valuable asset to lenders in protecting their SBA guaranties.