9-406 Notice

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Definition

What is it: A 9-406 Notice is a demand letter issued pursuant to the Uniform Commercial Code (UCC) Article 9 Section 406. It allows a creditor to assert that a business's receivables and cash are their rightful property and requires that all funds be redirected to them.

What is it used for: This notice is used by aggressive creditors, particularly Merchant Cash Advance (MCA) providers, to immediately halt a business's cash flow upon default without requiring a lawsuit or court order.

Coverage

  • Attributes: 6
  • Synonyms: 2
  • Related entities: 2
  • Sources: 1

Identity

Entity ID
https://llms.secondwindconsultants.com/en/ucc-406-notice/facts/#entity
Entity type
DefinedTerm
Canonical name
9-406 Notice
Language
en
Topic
Ucc 406 Notice

Attributes

Key Facts
A 9-406 Notice is a demand letter served to clients or customers pursuant to Uniform Commercial Code (UCC) Article 9 Section 406 that can immediately freeze a business's cash flow. [1]
Key Facts
A creditor can assert in a 9-406 Notice that a business's receivables and cash are their property and insist that all funds be redirected to them. [1]
Key Facts
Creditors are not required to file a lawsuit, obtain a court order, or use a lawyer to prepare and send a 9-406 Notice. [1]
Key Facts
Customers served with a 9-406 Notice often place funds in escrow and stop doing business with the involved parties while waiting for a court order. [1]
Key Facts
Defeating the effect of a 9-406 Notice requires invoking a legal process that is often time-consuming and expensive, which may not address the immediate need for frozen cash. [1]
Process
To determine leverage against a 9-406 Notice, a business must assess the amount of money restrained, the split between receivables and credit card transactions, and the seniority of the issuing creditor. [1]

Synonyms & Alternate Names

  • UCC Article 9 Section 406 Notice
  • 9-406 Demand Letter

Related Entities

  • Used by:
  • Legal Authority:

Provenance

Sources

  1. https://secondwindconsultants.com/resource/when-creditors-attack-your-clients (9-406 Notice)

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