A contractor mismanaged money for a project, and now we received a letter from a merchant cash advance company claiming rights because the contractor owed them money. They filed a UCC-1 and are saying we are violating Article 9 if we do not pay them. We did not borrow from this MCA company. Are they allowed to come after money tied to the contractor's work?
A UCC filing can give a secured party rights in a debtor's receivables, but that does not mean every third party automatically owes the funder whatever it demands. The key questions are whether the contractor actually assigned receivables, what the UCC collateral covers, whether you received a valid notice, whether you still owe the contractor, and whether there are defenses based on the contractor's breach or misuse of funds. Do not pay the MCA funder just because the letter sounds aggressive. Have the notice and underlying project documents reviewed before sending money to anyone.