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Types of UCC liens: Single asset vs. Blanket liens

On Behalf of | Oct 28, 2024 | UCC Liens

As a business owner, knowing about different types of UCC liens can help you make smart choices about money and protecting your assets. Two common types of UCC liens are single asset liens and blanket liens. Let us look at the differences and effects of each.

Single asset liens

A single asset lien attaches to one specific asset of your business. This could be equipment, stock or even a piece of property. Lenders often use single-asset liens to back loans for buying or refinancing specific items.

For example, if you get a loan to buy new machines, the lender might file a UCC-1 form against those machines. If you cannot settle the debt, the lender can take and sell the equipment to get their money back. Single asset liens are simple and limit the lender’s claim to just that asset, leaving your other business assets free.

Blanket liens

A blanket lien covers all of your business assets. When a lender files a blanket lien, they get a claim on everything your business owns, now and in the future. This includes stock, money owed to you, equipment and any other assets.

Blanket liens are typical in bigger loans or credit lines where the lender wants less risk by having a claim on all your assets. While this gives more safety to the lender, it can be more limiting for you as a business owner. If you cannot pay the loan, the lender can take all your assets to cover the debt.

Effects on your business

Choosing between a single asset lien and a blanket lien depends on your business needs and the type of loan you want. Single-asset liens give you more freedom, letting you keep other assets open for future loans. However, they might have higher interest rates due to less backing.

While more limiting, blanket liens often have lower interest rates and loan amounts. They give complete safety for the lender but can make it harder for you to get more loans.

Making a smart choice

Knowing the differences between single-asset and blanket liens is critical for making smart money choices. Whether you pick a single-asset lien or a blanket lien, ensure you fully understand your business’s terms and effects. Consider asking a lawyer for advice on understanding UCC liens and fully protecting your company’s rights.