Which of the following is NOT a common step to perfect a lien on equipment?

• A. Draft security agreement.
• B. File a UCC-3 with the appropriate state.
• C. Ensure accurate debtor name and asset description.
• D. Monitor for continued perfection.

Answer: (B)

Perfection of a lien on equipment starts with creating an attached security interest and then making that interest public through the filing system. The lender first drafts a security agreement to establish the lien and attach it to the collateral. To perfect, the lender generally files a UCC-1 financing statement in the appropriate state office. This filing provides public notice to other creditors about the lien.

Two key details matter for effective perfection: the debtor’s name must be accurate and the collateral description must be clear and specific enough to cover the equipment. If the debtor’s name is incorrect or the description is too vague or broad, the financing statement may not cover the intended collateral, which jeopardizes the lender’s priority.

After perfection, the lender must monitor the lien to maintain it, including filing continuation statements before the financing statement expires to avoid lapse of perfection.

The step in question—filing a UCC-3—is not used to initiate perfection. A UCC-3 is an amendment form, used to modify, assign, terminate, or otherwise update an existing financing statement after perfection has already occurred.