Blanket Lien Lending
Asset types other than accounts receivable and inventory are often included in the collateral pool. Advances are not tied to borrowing-base formulas. Controls are minimal, and monitoring of the collateral is informal. Collateral valuations may be based on financial statements. This type of lending is typically considered unsecured from the lender’s perspective for underwriting purposes.
The traditional blanket lien definition states that these loan arrangements entail a lien against all elements of the borrower's property on behalf of the lender. In practice, blanket lien arrangements are generally placed against all major holdings of the company, which may include equipment, vehicles, real property and financial assets. For purposes of underwriting, blanket lien loans are generally treated in a similar fashion to an unsecured line of credit and are used to collateralize loans in which the risks are considered exceptionally high. These financial arrangements should only be considered by borrowers when all other reasonable means of obtaining financing have been exhausted due to the extreme level of risk they represent in the event of default. Whenever possible, borrowers should seek loans with defined collateral limits in order to protect the company's assets against unnecessary risk. Lenders must typically make a blanket lien filing at the time of the loan in order to collect if the borrower does not pay the amount due in a timely way. In the event that the loan is not paid, the lender can legally seize any and all properties belonging to the company to repay the amount owed. Blanket liens are relatively common in the commercial credit market and are appropriate in cases where the business has failed to meet major financial obligations in the past.
For both borrowers and lenders, CNF Exchange represents a valuable tool in the financial marketplace. The CNF Lender Exchange platform is designed specifically to facilitate lending and investing transactions by allowing business owners to submit their commercial funding request directly through the online interface. The process is secure and allows lenders to evaluate and make loan offers suited to the credit condition of the company and to the needs of the borrower. CNF Exchange makes it easier to obtain the lending solutions needed for success in the modern business world.