What Is a Blanket Lien?

Access to the right business funding can open doors for your company. It can help you to take advantage of growth opportunities you might have had to pass on otherwise. But before you can convince a lender to hand over the funds you’re asking to borrow, that lender needs […]

Collateral is one way lenders reduce their risk exposure when they loan you money. If your business takes out a loan and fails to repay according to the terms of its agreement, your collateral can potentially be seized and perhaps resold to help the lender recover some of its losses.

For some loans, a lien against a single piece of collateral isn’t enough to make a lender feel comfortable. Instead, the lender may prefer a type of lien that secures multiple assets your business owns simultaneously. This is commonly known as a blanket lien.

What Is a Blanket Lien?

A blanket lien is a form of cross collateralization a lender uses when it wants you to pledge more than one asset to secure your business loan. If you agree to pledge multiple assets as collateral for business funding, the lender will typically file a UCC-1 with your secretary of state to stake claim to those assets. (You can learn more about how UCC filings work in this guide.)

Blanket liens aren’t unusual in the business financing world and they’re not automatically cause for alarm. In fact, they’re commonly required on loans guaranteed by the Small Business Association. Nonetheless, blanket liens do represent a higher level of risk for you, the borrower. As such, it’s important to you review all loan documents carefully before you sign.You should always understand what you’re agreeing to put on the line in the event something goes wrong.

A lender might ask you to pledge any of the following as collateral when you’re borrowing funds under a UCC blanket lien:

  • Accounts Receivable
  • All Equipment and Vehicles
  • Inventory (Current and Future)
  • All Business Assets

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