BiggerPockets

Todd,

I am not sure if you heard or read something about UCC-1 filing and their supposed benefits to delay creditors but I can tell you to tread carefully. A UCC-1 form, also known as a Financial Statement, is used in the commercial context to secure a lender's interest in a borrower's personal property as collateral for an extension of credit. (This also applies to securing a land trust interest or an LLC interest but not the underlying assets of the entity)

A UCC-1 form is typically filed with the state's Secretary of State Office and serves to put others on notice that the lender has a secured interest in the items listed on the form.

A UCC covers "Personal property" meaning non-real property used in operating a business, such as equipment, furniture, and inventory. On a few occasions a client will mistakenly believe that a UCC filing will cover real estate because a box on their form has a place to enter a "real estate description". This description is typically used for timber liens or for general fixture filings that cover an entire parcel of real estate.

Basically, the UCC-1 form serves as a public notice of a lender's interest in the assets for a business. Don't fall into any pitchman's trap about some obscure case or Public law argument lest you end up like Wesely Snipes. Strawman type transaction do not hold up in court and can only lead to problems down the road.

Todd,

If you were looking to build credit for your corporation then you would want to reverse the transaction. That being said, Dun and Bradstreet wont recognize the transaction because it is between related parties. Also, you will need to report to D&B that your corporation is paying on time. To report you will need to be registered with D&B (you personally). Long and short is if you want to build credit for your corporation it takes time and there is no quick and easy solution. Check out http://www.bossoffice.com/credit on how it is done.

I am also curious about this technique as well. I have read different things about turning leases and rental arrangements between parties into a credit building technique.

When I was younger I worked for a large corporation where the owner had a list of over 22 corporations. I can remember being taught how to fill these forms out between companies etc... At the time I didn't know what he was doing exactly - I just knew they were loans between the corps.

From what I understand and remember it can be done between both private individuals and corporations and actually the preferred way to loan a company money or visa versa.

Being that the UCC is filed at the state or county level (public record), it will be reported on a company's credit report (there is actually a space for UCC filings). I believe that even if the "lender" party doesn't report to the bureaus on a regular basis, when the loan has been paid off and a UCC3 is filed the bureaus will pick up the PIF debt and will show favorably on a company's credit report.

I am curious about the 'unrelated party' thing. I remember my old boss made sure each corporation had different officers - mostly employees and always one family members - but he or his wife were always majority share holders. My question is - Are the officers who execute the documents listed at the credit bureaus?

I would also like to know is how a UCC1 shows and effects a personal credit report? I have worked with people rebuilding their credit for many years and I don't believe I have ever seen one on a personal credit report. Because it is a public record will it show like a judgment and look like a negative item, or is there a special place for it like on a business report?

I am currently researching the use of the UCC for building both business and personal credit. And would be happy to share info and compare notes.