Blanket lien

Definition

One security interest covering every asset the business owns.

Why It Matters

An acquisition lender almost always takes one, and it is filed publicly as a UCC-1, so it shows up in any search a future lender or buyer runs. Two things follow. Equipment financing and a line of credit both become harder while it sits there, because a second lender has nothing left to secure against unless the first agrees to release or subordinate a piece. New equipment is the exception the UCC writes in: a purchase-money lender perfected within 20 days of delivery comes first on that machine, though your loan agreement may still require the bank's consent. And when you sell, the lien has to be paid off and released at closing, which is why a payoff letter is on every closing checklist. Ask what it covers and what gets released as the balance falls.

In numbers: An acquisition loan of $3.6M is usually secured by a blanket lien over 100% of the company's equipment, receivables, and inventory.