TLDR:
A blanket lien is a financial claim that gives a lender the right to seize all of a debtor’s assets used as collateral — covering all business assets — in the event of default.
Relevance
Common in SBA loans and venture debt. Startups should understand that a blanket lien can restrict future financing arrangements.
Why Blanket Liens Matter for Startups
A blanket lien gives the lender the broadest possible security interest over all business assets — receivables, inventory, equipment, intellectual property, and even future assets. While this makes sense from the lender’s perspective as it minimizes credit risk, it can severely restrict a startup’s ability to use its assets as collateral for subsequent financing. Venture debt, SBA loans, and many revenue-based financing facilities commonly include blanket liens, meaning founders must understand what they’re pledging before signing.
Negotiating Blanket Liens
Negotiating Blanket Liens
From a borrower’s perspective, blanket liens are restrictive — they limit the company’s ability to grant security interests to other lenders, sell or transfer assets outside the ordinary course, or enter into certain transactions. Negotiations often focus on carve-outs allowing the company to maintain operational flexibility: permitted encumbrances for ordinary-course liens (purchase-money security interests on equipment, tax liens), basket allowances for asset sales below a specified threshold, and provisions allowing junior debt subject to intercreditor arrangements. Borrowers should also negotiate release mechanisms so that the lien is partially released as the debt is repaid, especially for senior secured facilities where amortization is structured to deleverage over time.