Define: Blanket Inventory Lien

A blanket inventory lien is a legal claim placed on all of a company’s inventory as collateral for a loan or debt. It gives the lender the right to seize and sell the inventory if the borrower defaults on the loan.

A blanket inventory lien covers all of a company’s inventory, while a specific inventory lien only covers a specific subset of inventory. A specific inventory lien is typically used when a borrower wants to secure a loan using specific items of inventory as collateral.

A blanket inventory lien provides lenders with a broader scope of collateral, as it covers all of a company’s inventory. This reduces the risk for lenders and increases the likelihood of recovering their investment in case of default.

Borrowers with a blanket inventory lien face the risk of losing all of their inventory if they default on the loan. This can have severe consequences for their business operations and financial stability.

Yes, a company can still sell inventory with a blanket inventory lien. However, the proceeds from the sale must be used to repay the loan or debt secured by the lien.

Yes, a blanket inventory lien can be released once the loan or debt secured by the lien is fully repaid. The lender will provide a release of lien document, which should be filed with the appropriate authorities to remove the lien from public records.

Yes, a blanket inventory lien can be transferred to another lender if both parties agree to the transfer. This typically involves executing a new loan agreement or assignment of the lien.

Obtaining additional financing with a blanket inventory lien in place can be challenging. Lenders may be hesitant to provide additional loans if the existing inventory is already pledged as collateral. However, it is not impossible, and alternative financing options may be available.

Adding new inventory after a blanket inventory lien is in place may require the lender’s consent. The lender may need to update the lien agreement to include the new inventory or provide written permission for the addition.

The enforcement of a blanket inventory lien in bankruptcy proceedings depends on various factors, including the bankruptcy chapter, the value of the inventory, and the priority of other creditors. It is advisable to consult with a bankruptcy attorney to understand the specific implications in such situations.