Oh, Those Liens!

Have you ever filed a lien and found you're not in the required lien position on business assets?

Or maybe you’ve refinanced debt from another Lender – and then found out they won't release the lien?

Let’s talk!

There are a few liens that can sneak ahead of your new loan’s filings. These include landlord liens, franchisor liens, or seller liens when the seller provided carryback financing.

It’s no fun to bump into a situation like this, but fortunately it’s not hard to avoid. Simply be sure to add a clause in the commitment letter that allows you to pre-file a Uniform Commercial Code (UCC) financing statement before the loan closes. All lien searches will then be done before closing, which ensures there aren’t any existing liens in the queue ahead of yours. This allows you, the Lender, to establish priority ahead of any potential competing claims.

And since you already know we love defined processes, it won’t surprise you to learn that we recommend adding this to your checklist. It’s a simple way to avoid being blindsided when you file your lien.

On to the second lien challenge: what can you do when you’ve refinanced, but the previous Lender won’t release the lien?

Again, it’s about being proactive prior to the loan closing. In this instance, include a clause, with a signed confirmation, stating that when the Lender accepts the payoff funds, they agree to close the account and release all liens against any collateral securing their loan. And of course you’ll want to include the filing number for their loan!

Don’t forget: when refinancing multiple loans, be sure to make the appropriate notes on the Form 1050, listing the refinanced debt with a comment to “see attached” for a list of all the loans being paid off.

If you’ve ever encountered either (or both) of these situations, you know how painful they can be. But now you also know how easy they are to avoid. As the saying goes, an ounce of prevention beats a pound of cure.

Questions? By all means, give us a call at 877-576-0819, or drop us a note through our contact form. We’d love to help your team get ahead of these types of problems by reviewing your current processes and checklists, and we’re here to work with you on SBA training, Lender underwriting, or any of your SBA compliance questions.