CredibleLaw Publishes Guide to MCA Subordination Agreements and UCC Lien Removal as New SBA Rules Take Effect

New guide answers business owners’ top questions on removing MCA UCC liens, subordination agreements, and refinancing under the new October 2026 SBA rules.

SAN DIEGO, CA, UNITED STATES, October 6, 2026 /EINPresswire.com/ — Credible Law, a national legal resource and attorney referral network, today published a comprehensive guide explaining how business owners can clear merchant cash advance (MCA) liens that block lower-cost refinancing. The guide focuses on the MCA subordination agreement, a document that lets an existing MCA funder move behind a new lender so a bank loan, equipment loan, or credit line can close.

The release comes days after the U.S. Small Business Administration’s revised lending procedures, SOP 50 10 8.1, took effect on October 1, 2026. MCAs have been ineligible for direct refinancing with SBA loan proceeds since June 1, 2025, and the new procedures describe only a delayed path that begins with converting an advance into an amortizing term loan. For most businesses, that leaves conventional lenders as the near-term exit, and those lenders almost always require first position on the collateral they finance.

“Many business owners who are approved for cheaper financing lose the deal at the lien search,” a CredibleLaw spokesperson said. “The MCA funder’s filing claims first position, the bank won’t fund in second, and the owner doesn’t know a solution exists. Subordination is often that solution, and in many cases it is also the funder’s best financial option.”

The full guide is available at CredibleLaw’s page on the MCA subordination agreement.
Below, CredibleLaw answers the questions business owners most often ask about MCA liens, lien removal, and refinancing.

What is a UCC lien from a merchant cash advance?
A UCC lien is a public notice that a creditor claims a security interest in a business’s assets. MCA funders typically file a UCC-1 financing statement with the secretary of state shortly after funding. The collateral description is usually broad, often covering receivables, deposit accounts, inventory, equipment, and general intangibles, including assets acquired later. Lenders, landlords, and vendors can see the filing in a lien search, and it often appears on business credit reports.

How do I find out if there is a UCC lien on my business?
A business owner can search the online UCC records of the secretary of state in the state where the business is organized. For an LLC or corporation, that is generally the state of formation, not necessarily where the business operates. The search should use the exact legal name of the business. Many owners first learn about a filing when a lender asks about it during underwriting.

Why does an MCA lien block a new loan?
Under Article 9 of the Uniform Commercial Code, competing security interests in the same collateral are generally ranked by the time of filing or perfection, with the earlier filer ranked first. A bank, equipment lender, or asset-based lender that expects to hold first position will usually refuse to fund behind an existing MCA lien. Before closing, the new lender typically requires a payoff with a termination statement, a release of specific collateral, or a signed subordination agreement.

What is an MCA subordination agreement?
An MCA subordination agreement is a written contract in which the MCA funder agrees that a new lender will be paid first from some or all of the business’s collateral. The funder keeps its lien and its claim but moves into a junior position. UCC Section 9-339 expressly allows a creditor entitled to priority to subordinate that priority by agreement. The agreement may cover all collateral or only the specific equipment or receivables the new lender is financing.

Is subordination the same as subrogation?
No. Subordination is a creditor voluntarily giving up its priority. Subrogation is a party stepping into another creditor’s rights after paying that creditor’s claim, such as a guarantor who pays a debt. A business refinancing around an MCA lien almost always needs subordination.

Can an MCA funder be forced to subordinate?
Generally, no. Subordination is voluntary. What often changes a funder’s decision is the business case: a refinanced company with lower payments is usually more likely to keep paying, and the realistic alternatives for the funder, including default, litigation, or the merchant’s bankruptcy, can be worse. Weaknesses in the MCA contract itself may also affect the funder’s leverage.

Why would an MCA funder agree to move into second position?
If a funder refuses and the refinance collapses, the business keeps paying an obligation it was already struggling to carry, which can lead to missed payments, default, and legal costs on both sides. If the business files for Chapter 11, the automatic stay under 11 U.S.C. Section 362 halts collection, and 11 U.S.C. Section 552(a) generally prevents a pre-bankruptcy security agreement from reaching property the business acquires after filing, apart from proceeds of existing collateral. Because MCAs depend on future revenue, those rules can significantly reduce what a funder collects. Courts may also examine whether an MCA is actually a disguised loan.

How do I remove a UCC lien after paying off an MCA?
Once the obligation is paid and no commitment to advance remains, the business can send the funder an authenticated written demand for a termination statement. Under UCC Section 9-513(c), the secured party must cause a termination statement to be filed or sent within 20 days after receiving that demand when the collateral is not consumer goods. Business owners should keep proof of payoff and proof of the demand, and confirm the termination appears in a follow-up search. CredibleLaw explains the process in its guide on how to remove a UCC lien.

What if the MCA funder will not file the termination?
If a secured party fails to file or send a required termination statement, UCC Section 9-509(d) generally allows the debtor to file a termination statement itself, provided the record indicates that the debtor authorized it. UCC Section 9-625(e) also provides statutory damages of $500 for a secured party’s failure to comply with Section 9-513, in addition to any actual damages a business can prove. Because these steps have technical requirements, many owners have an attorney handle them.

Can I remove a UCC lien without paying off the MCA?
Sometimes. A lien may be challenged if the filing was unauthorized, filed after a settlement or payoff, filed against the wrong entity, or inconsistent with Article 9. UCC Section 9-625(e) provides $500 in statutory damages against a person who files a record it was not entitled to file. A lien can also be addressed through a negotiated settlement, a partial release of specific collateral, or a subordination agreement that leaves the lien in place but reorders priority.

How long does a UCC lien last?
Under UCC Section 9-515, a financing statement is generally effective for five years from filing. It lapses unless the secured party files a continuation statement within the six months before it expires. A lapsed filing no longer perfects the security interest, though the underlying debt may still be owed.

What is a UCC-3?
A UCC-3 is the amendment form used to change an existing financing statement. It can terminate the filing, release specific collateral, assign the lien to another party, continue it for another five years, or record a change in priority. A termination is the version most business owners want after payoff.

Can an MCA funder take money from my bank account because of a UCC lien?
A UCC lien and an ACH authorization are different things. MCA funders usually collect through debits the business authorized in the contract, not through the lien itself. Under UCC Section 9-312(b)(1), a security interest in a deposit account as original collateral is generally perfected only by control, not by filing alone. Seizing funds through a court process typically requires a judgment or a confession of judgment where enforceable. Business owners facing account freezes or levies should get legal advice promptly.

Does a UCC lien hurt business credit?
It can. UCC filings are public, appear on many business credit reports, and are reviewed by lenders, equipment finance companies, factors, and some vendors. Multiple MCA filings from stacked advances can make new financing especially difficult until they are addressed.

Can I get a business loan with an MCA lien on my company?
Possibly, but most secured lenders will require the lien to be paid off, released from their collateral, or subordinated before closing. Some lenders will fund with an MCA lien in place if it is properly subordinated on the collateral they need. Asking prospective lenders early about their requirements can prevent delays.

Can I use an SBA loan to pay off a merchant cash advance?
Not directly. Since June 1, 2025, SBA procedures have excluded MCAs and factoring agreements from eligible debt refinancing. SOP 50 10 8.1, effective for applications receiving an SBA loan number on or after October 1, 2026, describes a conditional path: the advance must first be converted into a term loan, that loan must amortize for at least 24 months, and the business cannot enter new sales-based financing after the conversion. Borrowers should confirm current requirements with an SBA lender.

Does bankruptcy remove an MCA lien?
Bankruptcy does not automatically erase a valid lien, but it changes how the lien works. The automatic stay stops collection, a secured claim is generally limited to the value of the collateral under 11 U.S.C. Section 506(a), and post-filing receivables are generally outside a pre-filing lien under Section 552(a). Smaller businesses may qualify for Subchapter V, a streamlined Chapter 11 track. Congress recently passed H.R. 7730 to raise the Subchapter V debt limit to $7.5 million; until it is signed into law, the limit remains $3,424,000.

What should a business owner watch for in a subordination agreement?
Drafts written by an MCA funder can include terms that hurt the business, such as cross-default clauses tied to the new loan, unchanged daily payments, new personal guaranties, reaffirmed confession-of-judgment language, added fees, or no obligation to file an amended UCC record. A sound agreement is limited in scope, clear about payments, and paired with a recorded UCC-3
.
Do I need an attorney to remove an MCA lien or negotiate subordination?
An attorney is not legally required, but there are practical advantages. Requests from owners often reach sales or collections staff, while lien decisions sit with a funder’s legal department. A merchant cash advance attorney can reach decision-makers, review the MCA contract for leverage such as reconciliation failures or terms that suggest a disguised loan, negotiate the draft, coordinate multiple funders, and keep the owner from making statements that can surface later in litigation.

What documents should I gather before speaking with an attorney?
Business owners should collect every MCA agreement, addendum, and renewal; bank statements showing each debit; any UCC search results; the new lender’s term sheet and subordination requirements; any default notices, demand letters, or court papers; and records of any reconciliation requests.

Key facts at a glance
• MCA funders commonly file UCC-1 financing statements claiming broad collateral.
• Under UCC Article 9, the earlier filer generally holds priority.
• UCC Section 9-339 allows a senior creditor to subordinate by agreement.
• UCC Section 9-513(c) requires a termination statement within 20 days of an authenticated demand once the obligation is satisfied, for non-consumer collateral.
• UCC Section 9-625(e) provides $500 statutory damages for certain unauthorized filings and termination failures.
• A financing statement generally lapses after five years unless continued.
• SBA SOP 50 10 8.1 took effect October 1, 2026, and allows MCA refinancing only after conversion and 24 months of amortization.

About CredibleLaw
CredibleLaw is a national legal resource and attorney referral network that connects businesses and consumers with independent attorneys across practice areas, including merchant cash advance defense, UCC lien disputes, business debt restructuring, and bankruptcy. CredibleLaw publishes plain-language legal guides designed to help business owners understand their options before they make decisions. CredibleLaw is not a law firm and does not provide legal advice. Business owners can reach CredibleLaw at 888-201-0441.

Legal disclaimer: This press release is for general informational purposes only and is not legal advice. Use of CredibleLaw’s resources does not create an attorney-client relationship. Laws, SBA procedures, and bankruptcy thresholds change, and outcomes depend on specific facts, contracts, and jurisdiction. Information reflects sources reviewed as of October 2026.

Kevin Leonard
Credible Law
+ +1888-201-0441
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Written By: EIN Presswire