What is a Blanket Lien?

A blanket lien is a type of security interest that gives a lender claim to all of your business assets, both current and future, as collateral for a loan. It is the broadest form of collateral coverage a lender can require.

How Blanket Liens Work

When a lender takes a blanket lien, they file a UCC-1 that covers "all assets" of your business. This includes inventory, equipment, accounts receivable, furniture, intellectual property, and any assets you acquire in the future.

If you default on the loan, the lender can seize and sell any business assets to recover their money, not just specific items like a particular piece of equipment.

Example

You take a $150,000 working capital loan with a blanket lien. Your business owns $100,000 in equipment, $50,000 in inventory, and generates $30,000 monthly in receivables. All of these assets secure the loan, and any new assets you acquire during the loan term are also covered.

When Blanket Liens Are Required

Lenders typically require blanket liens for:

• Working capital loans with no specific asset purchase
• Lines of credit
• SBA loans (standard requirement)
• Loans where specific collateral is insufficient

Blanket Lien vs. Specific Collateral

Specific collateral pledges particular assets. For example, an equipment loan secured only by that equipment. If you default, the lender takes the equipment but cannot touch other assets.

A blanket lien gives the lender broader rights but may also signal more flexibility. Lenders accepting blanket liens often do so because they cannot rely on any single asset to cover the loan value.

Protecting Yourself

If possible, negotiate for specific collateral instead of a blanket lien. If a blanket lien is unavoidable, ask about subordination agreements that would let you get additional financing later.

Always understand exactly what assets are covered before signing, and ensure the lien is properly released when you pay off the loan.