Definition and Examples of a Blanket Lien
A blanket lien is a type of lien that gives the lender the right to seize multiple assets, or even all of them, of the company as they are used as collateral for the loan. A blanket lien is a lien against several assets.
How a Blanket Lien Works
A blanket lien works similarly to other liens with secured loans, or loans that require collateral backing for funding, except that it encompasses a range of assets or all of the borrower’s assets. For example, if you own a transportation company, the lender may request the right to place a lien on all of your transportation vehicles instead of just one vehicle.
Types of Blanket Liens
In some cases, the borrower may need to obtain more than one loan using multiple company assets as collateral. For example, let’s assume that ABC Paints Company applied for loans with different lenders throughout the year, both of whom required the company to lien all company assets upon signing. In this case, the business owner would be securing a loan subject to both a first and a second blanket lien.
Key Takeaways
A blanket lien is a lien that allows the lender the right to claim multiple assets, often all of the company’s assets, that were used as collateral for the loan. Companies considering taking out loans with blanket liens should consider the risks of losing their assets if they fail to repay the loan. Most blanket liens remain in effect for five years from the date of filing. If the loan period is longer, the lender may provide a continuation statement to extend the registration.
Source: https://www.thebalancemoney.com/what-is-a-blanket-lien-5217951
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