The Hidden Liens That Can Quietly Kill Your Next Deal

In March 2015, a third-generation office furniture company hit a wall.

Their bank demanded repayment on a $5.5 million credit line. A lawsuit with a supplier was heating up. And a financing company had filed a legal claim against the business’s assets, without actually providing funding.

The company couldn’t operate, restructure, or secure new capital.

All because of liens they didn’t fully understand.

As the CEO later explained, everything stopped at once. The business had orders, history, and demand, but no flexibility. The problem wasn’t sales. It was paperwork buried in public records.

This is a situation far more common than most business owners realize.

The Risk Most Business Owners Never See Coming

When you borrow money, lease equipment, or finance inventory, lenders protect themselves by filing public claims against your business assets. These are called liens.

• In the U.S., they’re filed under the Uniform Commercial Code (UCC).
• In Canada, they’re filed under the Personal Property Security Act (PPSA).

These filings give lenders legal rights to your assets until debts are paid.

Here’s the issue: Most business owners don’t know exactly which liens exist against their business, or whether they were ever properly removed.

Meanwhile, lenders, suppliers, and potential buyers always check these records before doing business with you.

What they find can quietly decide whether a deal moves forward or dies.

How a Small Lien Turns Into a Big Problem

Lien issues rarely cause day-to-day pain. They cause damage at the worst possible moment.

Lost Contracts

You pursue a $200,000 contract. During due diligence, the customer finds a $5,000 lien from a supplier that went out of business years ago. They walk away.

The cost to prevent this? Less than $50 for a lien search.

Blocked Financing

You apply for funding to fulfill a large order. The lender finds multiple overlapping liens and can’t tell who gets paid first. The application stalls. The deadline passes.

Supplier Pressure

A supplier runs a routine credit check. They find liens you forgot existed. Payment terms tighten overnight. Cash flow stress hits immediately.

Deal or Sale Collapses

You plan to sell your business or bring in investors. Due diligence uncovers unresolved liens. The valuation drops, or the deal falls apart entirely.

These outcomes aren’t rare. In fact, they’re actually fairly predictable.

Why Lenders Hesitate When Business Liens Get Messy

Lenders don’t avoid complicated lien situations because they’re picky. They avoid them because risk becomes unclear.

If multiple lenders have claims on your assets, a new lender may be last in line if something goes wrong. That uncertainty alone can stop financing, even if your business is healthy.

Clean lien records tell lenders one very important thing: This owner understands their obligations and manages them well.

Messy records suggest the opposite.

When Business Owners Should Run Business Lien Checks

Lien searches shouldn’t be a once-a-year task. They should happen before key moments that matter.

Run a full lien search before:

Major Business Decisions

• Signing contracts over $50,000
• Applying for any financing
• Buying expensive equipment
• Discussing a merger or acquisition

Ownership Changes

• Bringing in partners or investors
• Transferring ownership
• Restructuring the business
• Planning an exit or succession

Relationship Reviews

• Renewing credit lines
• Refinancing debt
• Annual reviews of lender relationships

These are the moments when surprises cause the most damage.

Where to Run Business Lien Searches (and What They Cost)

United States (UCC)

• Search Secretary of State databases in states where you operate or hold assets
• National aggregator available through state business services
• Cost: typically $25–$75 per state

Canada (PPSA)

• Search provincial registries where you operate
• Cost: usually CAD $8–$12 per search

Always search under:

• Your legal business name
• Any DBAs
• Previous names used by the business

What to Look For in the Results

Not all liens are bad, but all need to be understood.

• Asset-specific liens: Common with equipment or inventory financing
• Blanket liens: Claims against “all assets” that limit future flexibility
• Judgment liens: Court-ordered claims that raise red flags immediately
• Expired or released liens: Paid debts that were never formally cleared
• Name variations: Liens that may not even belong to your business but still require investigation

Even harmless issues can slow or stop deals if left unresolved.

Yes, Lien Terms Are Negotiable

Most business owners assume lien terms are fixed. They aren’t.

You can often negotiate:

• Claims against specific assets instead of all assets
• Clear rules for who gets paid first
• Automatic lien releases when debts are paid down
• Precise descriptions of what is (and isn’t) covered

These details matter later, especially when you need additional capital.

What to Do in the First 48 Hours If You Find a Problem

Start Here: Hours 1–4

• Confirm the lien actually belongs to your business
• Pull the original loan or agreement
• Confirm whether the debt is paid, current, or disputed

Hours 4–12

• Contact the creditor’s legal department
• Confirm balances and release procedures

Hours 12–24

• Have a business attorney review filings
• Identify errors or expired registrations

The End Goal: Hours 24–48

• Create a plan: release, correction, or negotiation
• Assess impact on pending deals

Fast action prevents long delays.

Why Invoice Factoring Can Help Keep Things Clean

Invoice factoring is often misunderstood as just a cash flow tool. It also helps keep lien structures simple.

Factoring companies typically take claims only on accounts receivable—not equipment, inventory, or other assets.

That separation:

• Keeps asset claims clear
• Makes future financing easier
• Shows lenders you understand how to structure obligations

For growing businesses, this clarity matters.

Protecting Your Business Before Liens Become a Crisis

The company from 2015 eventually recovered. They secured financing and moved forward.

But the crisis never should have reached that point.

Most lien problems are preventable with:

• Regular searches at the right moments
• Immediate cleanup when debts are paid
• Thoughtful negotiation upfront
• Working with lenders who understand clean structure

If someone searches your business tomorrow, what will they find?

Because what shows up in public records can decide whether your next opportunity moves forward, or quietly disappears.

Ready to review your company’s lien position?
A short check today can prevent a very expensive surprise tomorrow.