Manufacturers and Machine Shops
Resolving Equipment Collateral Conflicts Between Lenders and MCA Funders

The most valuable machine on the floor is often the least available for settlement.

A manufacturer or machine shop facing MCA debt tends to see its equipment as a single reserve of value, while the paper sees a dozen separate assets with separate owners, separate filings, and separate consent requirements. The distance between those two views contains every expensive mistake this kind of negotiation produces, and closing it requires reading before offering.

Name Every Machine Before Discussing Any of Them

Match each press, lathe, mill, and compressor to its serial number and to the purchase, lease, or financing record that governs it. The schedule should state the owner of record, the operator, the remaining balance with its supporting statement, and the entity that signed each document.

An insurance list will not serve this purpose, since a machine present on the floor may belong to a lessor, to a vendor under a conditional arrangement, or to a related entity with its own creditors. Possession suggests nothing about title, and settlement proposals built on suggestion collapse at the first skeptical reading, which every creditor performs.

Sort the Paper by Machine, Not by Creditor

Assemble one folder per machine containing the security agreement, the filing history, any intercreditor arrangement, and the amendments that modified the original terms. Counsel who receives the file organized by creditor will reorganize it by machine before doing anything else, so the owner saves both time and fees by performing the sort in advance, with each folder ready for counsel to review and analyze without reassembly.

The review that follows is slow by nature, because each folder asks whether the collateral description covers the present configuration of the asset, whether after acquired and proceeds language reaches the attachments added since installation, whether landlord waivers or access agreements affect removal, and whether the governing law of each filing matches the jurisdiction where the machine stands, and the folders must be read in sequence since the answer in one changes the question in the next, and modifications deserve particular attention. A rebuilt spindle or a retrofitted control may fall inside or outside the described collateral, and the distinction matters only at the moment someone proposes to sell, which is exactly the moment nobody wants to discover it.

Priority Is a Reading Exercise Before It Is a Fight

The statute every party cites first provides that a perfected interest in proceeds follows a perfected interest in the original collateral, subject to authorization and stated exceptions. The New York statute on a secured party rights in collateral and proceeds rewards the party that traces authorizations and descriptions, not the party that asserts its category the loudest, and no lender wins by being a lender rather than by holding the better perfected position.

There are exceptions. Few arrive in time to matter.

Purchase money positions, fixture questions, and equipment lease characterizations each require their own analysis under the law the documents select. The date on the financing statement is *not* the answer by itself, and the owner who treats filing order as the whole contest will misprice both the risk and the settlement. The variables are extremely numerous and the margin for error extremely narrow.

The Shop Floor Constrains the Settlement

A machine that secures three claims still has to run the jobs that fund any payment plan, and the obstinate reality of the floor limits what the paper can promise. I rewrote this section on a gray February morning, which may account for its suspicion of any proposal that idles the primary mill in order to impress a creditor.

The blanket filing sits over newly acquired machines the way a tarpaulin sits over a lathe still in its crate out behind the shop: present, protective in theory, and useless until someone fastens it down with the specific filings and consents the statute requires. Counsel fastens it or finds it loose, and the settlement number follows that finding rather than preceding it.

Often we see forecasts that assume uninterrupted output from equipment the proposal itself offers for sale, and the contradiction inside those forecasts is visible to every party at the table. The receipts that service a settlement come from machines that remain, operated by workers who remain, under service contracts that remain funded, and each removal narrows the stream that the remaining creditors must share.

The file is ordinary. Machines, filings, balances, dates. The discipline is in refusing to let any of those items blur into any other, since blurred collateral produces confident valuations and confident valuations produce failed settlements.

SBA Equipment Debt Follows Its Own Sequence

Where Small Business Administration financing sits on the equipment, compromise follows collateral liquidation where the obligor cannot pay the full balance, with Form 1150 and financial statements required for each party seeking relief. The commercial loan servicing guidance of the Small Business Administration describes that order of operations, and an MCA negotiation that ignores it promises relief the program will not deliver. Charge off status changes the servicer. It changes nothing about the underlying obligation. Counsel should ensure the compromise application follows liquidation rather than preceding it.

Resolve the Conflicts on Paper With Counsel

Delancey Street offers a free confidential initial review of business debt concerns, and a manufacturer can present the machine schedules with the advance documents to ask whether the account qualifies for settlement assistance. The company provides debt settlement services as a settlement company and coordinates legal matters with independent counsel, since it is not a law firm. Counsel should ensure any agreement names the released machines, the released obligors, and the termination filings each secured party will make in order to clear the record.

Resist the urge to promise a clear title sale before every filing has been read, even casually promised to a buyer as a certainty, since the missing consent surfaces at closing and the failed closing hardens every creditor at once. Simply state that releases are pending, and consult and contact each lienholder through counsel until the written authorizations exist. What the owner promises, or refuses to promise, before the filings are read sets the tone every creditor remembers.

Manufacturing tolerates no ambiguity in measurement, and debt resolution repays the same intolerance. The settlement that holds is the one whose paper matches the floor, machine by machine, until nothing asserted exceeds what the filings prove.