Lien release

The removal of a filed security interest once obligations are paid off.

Why it matters

Without timely lien release after payoff, a filed UCC-1 can block a business from obtaining new financing. Lenders and factors performing UCC searches will find the old filing and may require it to be terminated before extending new credit. The release process requires the factor to file a UCC-3 termination statement with the same filing office that recorded the original UCC-1. Sellers who have satisfied all obligations should actively track whether the termination has been filed rather than assuming it will happen automatically.

How it appears in contracts

The factoring agreement specifies the factor obligation to release the lien after all amounts are paid and all funded invoices are collected. Common language requires the factor to file a UCC-3 termination within 10 to 30 days of final settlement. Under UCC Section 9-513, if the factor fails to file after a written demand, the seller may file a termination directly after 20 days. Sellers should obtain a written payoff confirmation and verify the UCC-3 filing through the relevant state filing office to ensure the lien is actually released.

Related terms

Related article: What is invoice factoring?

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.