A blanket lien is a lender's security interest in all of a business's personal property: receivables, inventory, equipment, deposit accounts, intangibles, and whatever the business acquires later. The lender makes it public by filing a UCC-1 financing statement describing the collateral as all assets. It gives that lender first claim on everything if the loan goes bad, and it means any other lender who wants collateral needs the first lender's consent, a carve-out or an intercreditor agreement. It does not reach real estate, which takes a mortgage.
- Also called
- An all-asset lien or general security interest
- Covers
- Business personal property owned now and acquired later
- Does not cover
- Real estate, and some assets that need extra steps
- Made public by
- A UCC-1 filing in the borrower's state of organization
- Who takes one
- Banks, SBA lenders, asset-based lenders, cash-advance providers
- Effect on other lenders
- They need consent, a carve-out or an intercreditor agreement
Two documents, one lien
A blanket lien is created by two documents that do different jobs. The security agreement, signed by the borrower, grants the lender a security interest and describes the collateral, usually by category: all accounts, inventory, equipment, general intangibles, deposit accounts and so on, now owned or later acquired. The financing statement, the UCC-1, is a short public notice filed with the state where the business is organized. It tells anyone who searches that this lender claims this collateral.
The distinction matters in practice. Under Article 9 of the Uniform Commercial Code a financing statement may simply say "all assets," but a security agreement that says only "all assets" is generally not enough to describe the collateral. That is why loan documents list categories at length. It is also why a lien search tells you who claims an interest but not always what the underlying agreement actually covers; for that, you read the security agreement.
Priority between lenders generally follows the order in which they filed or perfected their liens. A lender that files first on all assets is ahead of anyone who files later on the same assets, with the important exception of purchase-money lenders, covered below.
What an all-asset lien captures, and what it misses
"All assets" is broad, but it is not literally everything. Some collateral needs an extra step before the lender's claim is good against other creditors, and some sits outside Article 9 entirely.
| Asset | Covered by a blanket lien? | The catch |
|---|---|---|
| Receivables | Yes | The core collateral for most lines of credit; see borrowing base |
| Inventory | Yes | Includes raw materials and work in process |
| Equipment and machinery | Yes | Unless a purchase-money lender has priority on specific pieces |
| Deposit accounts | Yes, but | Perfected only by control, usually a deposit account control agreement, unless the account is at the lender's own bank |
| Titled vehicles | Yes, but | The lien generally has to be noted on the certificate of title |
| Intellectual property, contracts, licenses | Generally yes, as general intangibles | Some contracts and licenses restrict assignment |
| Shares in subsidiaries | If pledged | Certificated shares are best perfected by possession |
| Commercial tort claims | Only if specifically described | A generic description does not reach them |
| Real estate | No | Needs a mortgage or deed of trust recorded with the county |
| Equipment under a true lease | No | The lessor owns it, not the business |
A blanket lien also never reaches the owners' personal assets. A lender gets at a house or a brokerage account only through a personal guarantee or a separate pledge or mortgage, which is a different document with its own negotiation.
Who files blanket liens
Almost every lender that underwrites the whole business takes one. Banks take them on term loans and lines of credit. SBA 7(a) lenders take a lien on the business's assets and may add real estate. Asset-based lenders take one because their loan is sized on receivables and inventory, and they want the rest as backup. The exception is the equipment lender, which files only on the specific machine it financed.
Merchant cash-advance providers are the surprise for many owners. Advances are small next to a bank loan, but providers commonly file UCC-1s describing all assets, sometimes several from different funders. Those filings sit ahead of any later lender on the same assets until they are cleared, which is one reason refinancing out of cash advances starts with a lien search. See consolidating cash advances into a term loan.
How a blanket lien blocks the next lender
The lien itself only settles priority. What actually stops a second lender is usually the first lender's loan agreement. Nearly every business loan includes negative covenants that forbid new debt and new liens without consent, and many include a negative pledge. So even where the law would let a new lender take a valid lien, granting it without consent is a default under the existing loan, and a default can trigger the cross-default clauses in every other agreement the business has signed.
Equipment is the clearest example. A purchase-money security interest, a lien that finances the purchase of the specific equipment, can take priority over an earlier blanket lien on that equipment if it is perfected on time. The equipment lender will want to see that the existing lender permits it anyway, because a financing that puts the borrower in default with its main bank helps nobody.
| The new money | What the blanket lienholder is asked for | How readily it is given |
|---|---|---|
| An equipment loan or lease on a new machine | Consent under the debt and lien covenants; acknowledgment of the new lender's priority on that machine | Most readily: the machine adds value the bank never lent against |
| Real estate in a separate company | Nothing, if the real estate was never in its collateral | Usually straightforward; see property and operating companies |
| A seller note in an acquisition | A subordination agreement from the seller | Routine, on the senior lender's terms |
| An asset-based line behind a term loan | An intercreditor agreement splitting the collateral | Negotiated; common where both lenders are sophisticated |
| A second lien term loan | An intercreditor agreement ranking the new lien behind | Depends on leverage and whether the first lender's position is protected |
| A cash advance on future receivables | Rarely asked; often taken without consent | Frequently a default under the bank loan |
A lien you can legally grant is not the same as a lien your existing loan agreement lets you grant. Read the covenants before signing anything new.
When a lender will carve assets out
A carve-out takes specific assets out of the lender's collateral, or lets another lender take a first lien on them. Lenders agree when the assets were not part of why they made the loan. A cash-flow lender that sized its loan on earnings may not care much about one new truck. An asset-based lender that sized its line on receivables will not give up receivables at all, but may be relaxed about machinery.
The usual carve-outs are:
- Purchase-money equipment, through a "permitted liens" basket in the loan agreement, sometimes with a dollar cap set in the negotiation.
- Real estate and titled vehicles, which are often left out of the security agreement to avoid the cost of perfecting them.
- Assets the business cannot pledge, such as licenses or contracts that prohibit assignment.
- Assets being sold, released by a partial release so the buyer takes them clean.
What moves a lender is collateral coverage: if the remaining collateral still covers its loan comfortably, a carve-out costs it little. When the numbers are tight, the borrower's best argument is usually cash flow. See equipment loans alongside senior debt and getting new financing when a bank holds a blanket lien.
Know your lien position before you borrow
A new lender will search the UCC filings against the business in its state of organization before it commits. It is better for the owner to see the result first. The search often turns up filings nobody remembers: a lender paid off years ago that never filed a UCC-3 termination, a cash-advance provider from a past slow season, an equipment lessor whose lease ended. Each has to be explained or cleared before the new lender's lien can sit where it expects.
That is why Transparent's checklist for a line of credit or asset-based loan asks for a debt schedule and UCC position, the existing liens, alongside the aging reports and financial statements. The lien position goes into the lender package with the loan request, so every lender reviewing the file sees the same picture of who holds what. See what a business debt schedule should show and what goes in the package.
Common questions
- Is a blanket lien normal on a business loan?
- Yes. Banks, SBA lenders and asset-based lenders routinely take one. It is the default, not a sign the lender thinks the business is weak. What varies is how much room the loan agreement leaves for other financing.
- Does a blanket lien cover my house or personal accounts?
- No. It reaches only assets the business owns. A lender reaches personal assets only through a personal guarantee or a separate pledge or mortgage signed by the owner.
- Can I get equipment financing if my bank has a blanket lien?
- Usually, with the bank's consent. A purchase-money lender can take priority on the specific equipment it finances, but borrowing without consent is typically a default under the bank's loan agreement. Most banks consent to purchase-money equipment because it adds value they never lent against.
- Does the lien go away when the loan is paid off?
- Not by itself. The lender's security interest ends with the debt, but the UCC-1 stays on the public record until the lender files a UCC-3 termination or the filing lapses. Ask for the termination in the payoff letter.
- Can two lenders both have a blanket lien?
- Yes. Both filings can sit on the record, and priority generally follows the order of filing. In a planned structure, an intercreditor agreement sets out which lender comes first on which assets, as with an asset-based line and a term loan.