Liens can be defined as legal claims that can be found written in the fine print of small business loans. In case the borrower fails to perform its obligations, a lien can provide the lender with some security to be better protected.
Filing a Lien and Blanket Liens
If the lender files a lien for unpaid debts, the former gets an opportunity to sell a business’s assets so to collect money. This is how the lender gets protection against risks. The thing that loan terms include a lien option should not make you avoid applying for loans.
If the lender has filed a lien against your business, this is not the end of the word. You should take it as an official notice asserting that an asset or collateral might be acquired in case you default.
Multiple liens imply different lien positions – first, second, third, and more. In case you default on your loan, the 1st lienholder must be paid first, followed by the 2nd, 3rd, and the rest.
When it comes to a blanket lien, it provides the lender with a certain right. A blanket lien enables the lender to seize almost any asset and collateral owned by the borrower so to pay off the debt.
Blanket Liens’ Impact on Your Business
Generally, liens can cost you a lot if you are experiencing hard financial times. In case your lender chooses to use a blanket lien and seize everything having the blanket lien in the 1st lien position, things will get even worse.
You may want to apply to 2 different lenders to get some finances. Take into account that both of them may insist on being the 1st lienholder. You may not get approved for funds if neither of them agrees to be in the 2nd position.
It is also important to note that suppliers and franchisors may also file liens against your business. Naturally, it will become more difficult to secure loans at competitive rates. To protect your business, you should take your time to learn about liens and turn to a reputable payment processor like FAM for a business loan.
Consider turning to firstamericanmerchant.com, a reliable high risk processor, to get the best small business loans at the lowest possible rates. With First American Merchant (FAM), be sure to get the best for your business even in the case of a Blanket Lien.
Here are some useful tips to help you enjoy the best loan terms for your company:
- Check for liens filed against your business on a regular basis
- Make sure the filed lien is due to your loan agreement terms
- Be sure your old liens have been terminated
Do not hesitate to get better prepared and educated about liens, blanket liens, and loan terms before applying and signing any document so to be better protected.