Will a General Security Agreement Impact Your Business?

A General Security Agreement (GSA) can impact your business finances. Let’s take a look at what a GSA is, how liens can impact your business finances, and how to get financing even when you have a lien.

What is a Lien?

A lien gives someone a legal right to someone else’s property. Liens are used as security by allowing a lender to take property or other legal action to satisfy debts and obligations. 

Because liens are often part of the public record, potential lenders use lien information to determine credit worthiness. 

What is a General Security Agreement?

A General Security Agreement (GSA) is a common form of lien often used to secure commercial loans or other business obligations owed to lenders. 

“Blanket lien” is the term used for GSA in the US, and for good reason. When you enter into a GSA with a lender, you’re often being asked to provide security over all of your present and future property (for the duration of the agreement). 

How can a Lien Impact Your Business Finances?

When entering a GSA, carefully read everything and be sure you understand the full scope of the agreement. Sometimes the stipulations of the GSA are inconsistent with the commitment letter or loan agreement. This can cause ambiguity and legal disputes. 

If your business has a GSA with your bank, obtaining financing through other lenders can be difficult. 

Do Liens Leave a Permanent Stain on Your Record?

Liens are there for a good reason. That said, if you have an unnecessary lien on your record, it is possible to remove it. In most cases, a lien can be removed by the person or organization that created them. However, there are some exceptions.

• Pay it off. Liens are typically removed when the debts secured by the lien are paid off.
• Negotiate. If you can’t pay off the debt, you might be able to negotiate a deal with the creditor. They might be willing to accept less than what you owe to get the debt off their books.
• Get it corrected. Liens are sometimes submitted in error. It’s not uncommon to have a lien on your record that is no longer current. Ensure your liens are released when you’ve paid off your debts. If you discover an old lien that should have been released, get that cleared up as soon as possible. 
• Dispute it. Legal action against a lienholder is sometimes necessary to get the lien released. Investigate whether or not the claims are still valid as some liens expire after a certain number of years. 

How You can Still Get Financing With a Lien

It can be difficult to get financing when you have a lien against you. Banks, especially, shy away from lending to businesses with active liens. However, obtaining financing with a lien is not impossible. 

Lease financing is a credible mainstream industry that gives you an alternative to bank loans and lines of credit. You can secure lease financing even with a lien simply by having the lienholder sign a waiver acknowledging that the equipment being leased is not under the lien.

The Impact of Liens on the Future of Your Business

Liens do impact your business, particularly when you’re looking for additional financing. But it doesn’t have to affect your business indefinitely. 

There are means of removing a lien and there are alternative forms of financing that can work even when you have an existing lien. Don’t allow a lien to hinder the growth of your business in the future. 

To find out more about lease financing, contact one of our leasing specialists today.