Watch for Lien Risks

Hey there, savvy business owners! We've got a tale of caution for you today, and it's all about the wild world of used equipment. You know, that trusty backhoe, that sturdy delivery van, or even that photocopier that somehow still works? Yep, those.

Now, we all love a good deal, especially in times like these with supply chain mayhem knocking on our doors. So, you spot a sweet deal on that piece of equipment you've been eyeing for your business. You check it out, it looks great, the seller seems legit, and you think, "What could possibly go wrong?"

Well, let's rewind for a moment and talk about a little something called liens. No, not the kind you wear to look fancy, but the kind that can turn your deal into a real ordeal.

The Lurking Lien

Imagine this: You're a construction whiz, and you find the perfect used excavator. It's exactly what your projects need, and it seems like a no-brainer. The selling company tells you they've owned it for six years, paid off the loan, and all is well. So, you go ahead and make the purchase.

Fast forward six months, and guess who's calling? Yep, it's the seller's bank, and they're not inviting you to tea. Turns out, the seller defaulted on an unrelated loan two years ago, and there was a sneaky little thing called a "blanket lien" hidden in the fine print. This lien covered all of the seller's assets, including your beloved excavator. Surprise! The bank's claiming ownership, and they want their toy back.

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Now, not only are you excavator-less, but you've kissed your hard-earned money goodbye unless you believe in miracles (or the seller suddenly becomes a philanthropist, which is quite unlikely).

The Lien Maze

Okay, that scenario might sound like a rare horror story, but it's a real possibility when you're buying used equipment. Especially when you're not dealing with an authorized dealer but a private seller. As an equipment financing company, we've seen these nightmares a few times.

So, what's the lesson here? Every used equipment buyer should be like Sherlock Holmes, investigating whether there are any liens lurking in the shadows. That's usually done with something called a UCC search (don't worry, it's not as complicated as it sounds). But here's the kicker: a UCC search doesn't guarantee a 100% lien-free title. Nope, nada, zilch.

The Blanket Lien Mystery

The biggest villain in this lien saga is the blanket lien. Imagine this: a lender slaps a lien on everything a company owns when they take out a loan. So, even if a company borrows for, say, a new company car, suddenly all their assets, even those paid off ages ago, are under that lien. And guess what? This can happen with every loan they take out. So, your beloved piece of equipment might have not one, but two or three blanket liens on it. Sneaky, right?

The problem? Anything with a blanket lien on it can't be sold without the bank's blessing. These liens have a knack for slipping through the cracks, hiding in fine print, and being forgotten until they cause trouble.