Many times a year, I receive a call from a customer with whom I have an ongoing lease on a specific and expensive piece of equipment. The calls are all very similar. They go something like this:

Customer:" 'I'm seeking financing from a lending institution. They have asked me to call you because your UCC-1 filing is holding up my loan. I need you to remove your filing."

Says I: "Uhhhhhhhhhh....."

My filings are very clear in that they are securing only my piece of equipment, yet the calls come. The calls are always awkward. On one hand, I need to tell my customer that the UCC-1 filing is specific to my equipment and is not preventing a loan. On the second hand, I want to be sensitive to what the customer believes is the issue - after all, he/she is being told by the lender that this is the case. I want to gently say, "The filing needs to stay in place unless the lender or you want to pay off the contract in full." I want to have all parties on the same page of understanding. Trying to educate customers on the legal issues of security interests and perfecting those interests by filing UCC-1 documents can be difficult in a 5-minute phone call. Having those conversations can "muddy the waters" and make the conversation seem like I am obstructing or being difficult. Often times the customer only sees what they want, and know that they aren't getting closer without my help.

On and on it goes - after a lengthy conversation it is still not resolved. It is not uncommon to quickly get involved in many issues that soon morphs into some creature with many tentacles.

The "first in line, first in right" aspect of a UCC-1 filing is a really big deal. No one wants the 800-pound gorilla (the lending institution) to walk past all the people in the movie line and butt in front of them. The UCC code allows even the small guy to tell the gorilla to get in back of the line without fear of being dragged off to the jungle. 

While I am not lending legal advice, or speaking of specific arguments one should make when these calls come to you as a Credit Manager, I would like to mention just a few items that could be of use.

As with so many other issues, communication is the key.

In those times when discussing the legal issues involved and the customer understands the concepts, it is very useful to ask them to review the information with the lender. Most of the time I never hear another word about it. In my experience, often times that is because the lender already knows the answer and was simply rolling the dice to see if it would make it happen.

I have found it useful to ask the customer for a conference call or at least to have the lender call me directly. Often times a three-way conversation is needed because the customer doesn't understand the issue. Having a conversation with all parties at the same time is extremely helpful! Speaking voice to voice on the phone personalizes all parties to one another. These calls allow the customer to see that you are working with them on the issue rather than being difficult. In those conversations with the lender, my experience is that when I tell them that my filing is not securing anything but my specific equipment, they back down and I never hear from them again.

Following up with all parties in an email is an important step which "seals the deal" and confirms to everyone that while the filing will not be removed the loan is not being held up because of it.

I have to admit that the issue for me and the equipment I sell is in some ways easier to deal with than for many other businesses who are selling to a customer on a constant daily, weekly, monthly basis. Many companies sell products such as food or supplies which are used up in the customers business. This obviously is different than when I am securing a specific item. However, the concept is the same.

Stick to your guns and communicate slowly and clearly to protect your security interests. No - guns aren't needed. Better said, stick to the principles and all will be well.