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Commercial Lien Strategy


    • A mortgage is the most common type of commercial lien. For a mortgage to be most effective, it should be in the first lien position, which means that the mortgage is filed on a property before any other lien. The lender with the first lien position has the first right to the property in the event of default. A mortgage is a 10- to 20-page document signed by the property owner and notarized. It is then filed at the county clerk's office that governs the municipality where the property is located.


    • A UCC-1 is a document used to place a lien on equipment or business assets. Two ways are used to file a UCC-1. The first is a blanket lien on all assets or all equipment, which means that the lender has an interest in all assets now owned or purchased in the future. The other option is to file on specific equipment or assets, which requires the equipment or asset to be very specifically detailed on the UCC, down to the serial number. The UCC-1 is a standard document that is generated with loan documentation software.

    Motor Vehicle

    • Motor vehicle liens are taken when a vehicle is used as collateral. Unlike mortgages or UCCs, which are generated by the lender, a motor vehicle lien is placed on the title direct by the state in which the vehicle is registered. The borrower will sign a motor vehicle financing statement at closing. This document is then taken to the state's department of motor vehicles where the lien is placed on the title.

    Pledge Agreement

    • A pledge agreement is different from other types of collateral instruments in that it is not recorded with any agency. A pledge agreement is used to secure cash collateral, such as a savings account or CD. The borrower pledges the account as security for the loan. If the deposit account is held at a different institution, the lender will need a control agreement executed by one of its officers. Without this document, the bank cannot access the funds in the event of default.

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