Definition
A legal claim on an asset as security for a debt.
Why it matters
Factors typically require a first-position lien on receivables.
Where it shows up in a deal
Liens surface at the UCC search that opens every diligence file. The search returns every active filing against your exact legal name in your state of organization, and anything that covers accounts has to be released, subordinated or worked around before a receivables funder can take the position it needs.
What it affects
- Priority follows filing order, so an older filing outranks a newer one over the same collateral.
- Federal and state tax liens attach broadly and usually require a subordination agreement, which takes time.
- Judgment liens and prior factoring filings are common surprises on files the owner believed were clean.
- Negotiating a release or an intercreditor agreement is measured in weeks, so start before you need the money.
The common mistake
Related terms
- UCC-1 FilingA public notice that a lender has a security interest in a business's assets.
- CollateralAn asset pledged to secure financing.
- Asset-Based LendingA revolving credit line secured by receivables, inventory or equipment.
- Assignment of ClaimsThe federal process that lets a contractor assign government contract payments to a funder.
Questions about how lien affects your facility?
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