A: First of all almost every company that you will deal with including multi-billion dollar companies have a UCC filing against them. That in itself does not mean that much. All companies need outside financing and the party providing the outside financing will require a UCC filing to protect their interest. More important than the UCC filing is any other legal activity involving your customer. Obviously, if there are other lawsuits, judgments, multiple UCC filings, or tax liens, this indicates that there may be financial difficulties. At that point further considerations must be made to decide whether to do business with that particular customer.  

If there is a situation where the supplier of goods and services is selling a large piece of equipment which may have a superior position to that with the prior secured creditor. Statutes may be different in each state and you have to provide notice to the prior secured creditor in order to properly obtain a superior secured position. However, if the items that are provided do not have substantial value to you if taken back and resold, then this process is of little help.  

The most obvious way of protecting yourself is doing a thorough check of a new customer or making regular follow ups on old customers that are having some issues with payment, and setting payment terms of payment in advance or COD. This is not practical in many cases but if it appears that you have a customer that has diminishing financial resources, losing that customer rather than supplying that customer and not being paid for your goods or services may be a better option. One thing the UCC filing may provide is the name of the customers bank. Sometimes if legal action is necessary and you pursue post judgment action including garnishment, the name of that bank can be helpful in trying to collect the account. The bottom line is a UCC filing itself is not unusual but other activity such as tax liens, judgments and other signs of non-payment of creditors is a red flag.