Define: Floating Lien

A floating lien is a type of security interest that allows a creditor to claim and seize a borrower’s assets, such as inventory or equipment, that may change or fluctuate in quantity or value over time.

Unlike a fixed lien, which attaches to specific assets, a floating lien covers a broader range of assets that may change or be replaced during the course of business operations.

A floating lien can cover various types of assets, including inventory, accounts receivable, equipment, vehicles, and other movable property.

Having a floating lien in place may restrict your ability to sell or dispose of the assets covered by the lien without the creditor’s consent. It is important to understand the terms and conditions of the lien agreement to avoid any potential conflicts.

Yes, it is possible to obtain financing with a floating lien in place. However, lenders may require additional documentation or assurances to protect their interests.

Yes, a properly registered floating lien can be enforced against third parties, meaning that the creditor can seize the assets covered by the lien even if they are in possession of someone other than the borrower.

To remove a floating lien, you typically need to repay the debt in full or negotiate a release agreement with the creditor. Once the lien is released, you regain full control over the assets.

If you default on the loan, the creditor may have the right to seize and sell the assets covered by the floating lien to recover the outstanding debt.

Yes, a floating lien can be modified or amended through a written agreement between the creditor and the borrower. It is important to consult with legal counsel to ensure that any modifications are properly documented and enforceable.

The legal requirements for creating a valid floating lien may vary depending on the jurisdiction. Generally, it involves executing a written agreement, properly identifying the assets covered by the lien, and registering the lien with the appropriate government authority, such as the UCC (Uniform Commercial Code) filing. It is advisable to consult with a legal professional to ensure compliance with local laws and regulations.