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How to Use an Asset With a Lien to Get a Business Loan

Do you want to get a business loan using assets with a lien?

How to unlock your Assets!  Here are 3 ways to use an asset that has a loan on it now as collateral for a new business loan.

Apply below:  Expert programs that include guidance getting the maximum out of your collateral.   Even if you still owe on it right now!

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1. Request a lien release. 
2. Lender takes a 2nd lien position
3. Payoff the lien with proceeds. 

3 Ways to use an asset with a loan on it as collateral for a new loan. 

1. Ask for a release of lien:

Call the existing lien holder and ask them to release the UCC lien.   Read here for more about what UCC Liens are.    Lenders often take much more collateral than they need because they want to cover any losses on defaults.  They sometimes even take all of a business’ assets instead of only they need.  They over collateralize the loan and improve their loan to value position.  Most borrowers think that is only way it will be and do not object.   The lender wins by default just by asking for more than they deserve.   

The lender may agree to release a certain piece or more of the collateral they are holding.  This works best when they have many pieces of collateral and you have already paid a lot of the loan down with timely payments. 

Push the lender hard on loans you have paid down significantly as agreed.   

Negotiation Example:  2 years ago, you took out a 4 year business loan for $100,000 and your current balance is $40,000.   The lender took 4 pieces of construction equipment worth $25,000 each and all payments have been on time. 

Telling the loan company they still have enough collateral  and maybe more than when the loan was originally closed.

The loan to value, LTV, may now be lower than when the loan closed.    In those cases, you have paid the loan loan down faster than the equipment depreciated during that time.

If they agree, follow up to verify your asset has been released at the Secretary of State, also known as the SOS.    Push hard to get a release as you may need the extra collateral, especially for a larger business loan.

2. New lender takes a second position. 

They can take a 2nd position lien on the collateral.

This works best with real estate that has a lot of equity in it.  The new loan provider can be the 2nd lien holder against the Real Estate.

Example:  A first position lender has a lien on commercial real estate.   The property is worth $500,000 and the current balance is $100,000.   The new lender makes a loan for $50,000 and then takes a 2nd lien on the property behind the 1st lien holder.   2nd and even 3rd positions are usually limited to real estate or cash flow financing.

3. New loan proceeds are used to payoff the loan

The existing loan balance on the asset is paid off.   This happens most often when the balance on the loan is very low.  As part of closing, the 1st lien is paid off and that amount is debited from the proceeds of the new loan. 

For Example:  Your business is closing a loan for $50,000 using equipment as collateral.    There is a first lien holder on the equipment and that loan has a payoff balance of $10,000.  At closing, the new lender sends a check for the payoff amount to the first lien holder and takes a 1st position on the collateral.
 

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FAQ on getting a business loan using assets with a lien .

Can I use equipment with a loan on it as collateral?

Lenders may take a 2nd position on the collateral.  In most cases, they will not make a loan if there is a lien on the asset and it is not paid off.

Do I have to payoff the loan first?

You will have to payoff the loan in many cases.   Some real estate and cash flow loans may not require a payoff of the 1st lien holder.   This will vary by lender depending on their guidelines.

Can a lender payoff the loan on my collateral?

Lenders can payoff the loan on your collateral.   The process is faster when the lender pays off the loan because they will verify and also handle the payoff. 

Can I get a loan before I have the title in hand?

Ask the lender if they are willing to close the loan and request payoff and title from the lender holding the title as part of closing.    You will have to have the title in hand if they are not willing to do that.

Conclusion

Getting a business loan using assets with a lien is possible.

Find out the lender’s requirements early in the process.   If allowed, there may be extra steps that can take a few days.   Start right away and you can close a few days sooner.

Between a release of lien, a 2nd position, or payoff, there are several creative ways you may be able to use collateral that has a loan on it right now to get a new loan.

If not, find out if other lenders have different criteria that will allow you to use encumbered collateral.    Checking into these options often lets borrowers get loans they never would have gotten otherwise.

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Asset Based Loan

Open Tax Lien Business Loans – Get Resolution, Today!

The place for businesses to get money to pay federal or state liens with, or without a payment arrangement, behind them.

Your business can choose from several options to get a business loan to resolve the debt, even with an open tax lien that has no payment arrangements.

Act now and resolve your business back taxes for good.

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Open tax lien business loans

Program # 1:   Business funding based on the assets of the business.  If the business has over $10,000 per month in sales, they may be able to get a business loan based on their sales.

Commercial real estate with equity can also be used to payoff the open tax lien.   At closing the tax lien is paid off from the proceeds of the loan.   Another option is to use business equipment. Get capital based on business equipment.  Use the funds to payoff the tax lien.   These options can also be used to pay a tax lien that has a payment plan and also tax extension deadline balances.

Business loans with an IRS payment plan

There are several business loans that can be obtained for a business with an IRS tax lien that has a payment plan. A business can use the revenues of the business or the hard assets of the business.  This can be Real Estate or Equipment.

Business loans without a payment arrangement with the IRs.

A business that has a tax lien without a repayment plan can be financed.   Businesses needing immediate help can now quickly use their revenues or assets to get working capital or a business loan.  The process is fast and easy.   Up to 5 to 10 business days and just a one page application.

Resolve your open business tax liens with several quick programs.

Finally, other sources of information related to tax liens may be found at the SBA small business administration site.

FAQ on business and open tax liens

What is an open tax lien?

An open tax lien is a lien that has been filed by the irs or state government against a person or business that does not yet have a payment plan approved for repayment.

Can I get a business loan with a tax lien on my credit bureau?

There are several business loan options for businesses with a tax lien or open tax lien that are usually paid off at closing. Options are based on assets such as real estate or equipment as well as on cash flow.

Do I need an offer in compromise from the IRS before I can get a business loan?

A formal oic is usually, but not always needed. Real estate or equipment backed transactions may allow for payoffs of irs or state liens at closing. Smaller tax liens may not require an offer in compromise to close a business loan.

How do I know if I have a tax lien against me or my business?

Registered letters are sent by the IRS and state when liens are filed against you or your business. It will also appear on your credit bureau and against real estate you own. The county real estate office will have a record of liens against property.

Should I pay a tax lien if it has already been filed and damaged my credit?

Most lenders will not approve a personal or business loan with an active tax lien. Companies and vendors you do business with may be reluctant to enter into a contract with one on your credit file. The IRS also has the power to seize any of your assets without notice.