As you look to secure funding for your business, you may come across the concept of a lien. A lien gives creditors the legal right to claim your property if you fail to pay them back for a loan or purchase. Liens are most commonly found in mortgages, where lenders can take your house if you fail to meet your monthly payments. A lien isn’t necessarily a bad thing, but it can impact your credit and financing opportunities. Let’s dig deeper into a lien’s definition and what it means for your business. Is a Lien Bad? A lien isn’t necessarily a bad thing to have. Many people take out voluntary liens when they accept mortgages or business loans. If you keep making payments related to this lien—proving to your lender that they will get their money back—then a lien isn’t something you need to worry about. However, there are instances when a lien can be bad. An outstanding lien can mean that you hold unpaid debts to various creditors or vendors. When this condition applies to a property, it could relate to your mortgage lender or the local government that collects property taxes. If you fail to pay these obligations, then your creditors have the right to seize your property or take legal action against you. What Happens When You Have a Lien Against You? If you have an unpaid lien against you—or if you stop making payments on it—then the lienholder can step in and reclaim their assets. The person who issues the lien is known as a lienholder. For example, your bank might be your lienholder when issuing your mortgage. In theory, the bank or financial service provider can seize your business if you have outstanding liens. They can evict you and sell your property at auction. This action allows your lender to reclaim some of their lost funds, even if they sell your property below market value. However, not every lien against you can lead to foreclosure or seizure. Lenders often do whatever they can to get business owners to meet their financial goals. They will also take business owners to court in hopes of recouping the lost funds in cash rather than spending time selling off assets. Navigating the seizure of assets and the resale process is time-consuming for lienholders and can severely damage the credit of loan recipients. How Do You Get a Lien Removed? You have a few options if you need a lien removed from a property or asset. First, you can pay off the debt. This option is the best if you took out a loan and created the lien. You might also need your lienholder to submit a release-of-lien form if you paid the lien holder before the lien was placed. This document needs to be notarized and will protect your accounts from going to collections. Most entrepreneurs have liens related to their business assets. If you make regular payments against your debt, you can grow your credit and keep your lienholders happy. The best way to avoid bad liens is to keep up with your repayment schedule as best as you can.