Blanket LienCredit Repair Definition
A lien that gives a creditor the right to seize all of a debtor's assets if the debt is not repaid.
Definition
A blanket lien is a type of lien that grants a creditor the legal right to seize nearly all of a debtor's assets if the debtor fails to repay a loan. Unlike specific liens that attach to a particular asset (like a mortgage on a house), a blanket lien covers a wide range of the debtor's property, including accounts receivable, inventory, equipment, and sometimes even future assets. These liens are commonly used in business lending, particularly with asset-based loans, to provide maximum security for the lender. Filing a UCC-1 financing statement typically perfects a blanket lien, making the creditor's claim public and establishing priority over other creditors.
Frequently Asked Questions
What types of assets are typically covered by a blanket lien?
A blanket lien usually covers most business assets, including accounts receivable, inventory, equipment, machinery, furniture, fixtures, intellectual property, and general intangibles. It may exclude specific assets like real estate (which requires a mortgage) or vehicles (which require title liens).
How does a blanket lien affect a business?
A blanket lien can make it difficult for a business to obtain additional financing, as most of its assets are already pledged as collateral. It also gives the lender significant power in case of default. However, it can enable businesses to secure loans they might not otherwise qualify for.
Can blanket liens apply to personal assets?
While typically used in business lending, if a business owner provides a personal guarantee secured by their assets, a blanket lien could potentially extend to cover personal property, depending on the loan agreement's terms.
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