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Senior lien
Also called first lien, senior secured position.
The claim on collateral that ranks ahead of all others, satisfied in full out of that collateral before any junior claim receives anything.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Priority in personal property collateral is generally decided by first to file or perfect, so the senior position usually belongs to whoever got its UCC-1 on record first — not to whoever lent the most or lent first. On real estate, recording order does the same job.
There are exceptions written into the rules. A purchase-money security interest in equipment or inventory can leapfrog an earlier blanket filing if it is perfected within the statutory window and, for inventory, the earlier secured party is notified. Certain statutory liens, and federal tax liens under their own priority regime, follow separate rules that can disturb the ordinary filing order.
Seniority can also be rearranged by contract. A subordination agreement moves a senior party behind a junior one for the obligations described; an inter-creditor agreement can carve up rights in more detail — who may enforce, who gets what out of which asset, and who must stand still while the other collects.
Where this one catches people
Being senior is about order of payment out of collateral, not about the size of your claim or how well you get paid. A senior lien over a business with no realisable assets is worth what the assets are worth, which is often very little once equipment is sold at auction and receivables are chased by someone the customers have never heard of.
Where you will meet this term
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Senior lien — common questions
What does senior lien mean?
The claim on collateral that ranks ahead of all others, satisfied in full out of that collateral before any junior claim receives anything.
Where does senior lien catch people out?
Being senior is about order of payment out of collateral, not about the size of your claim or how well you get paid. A senior lien over a business with no realisable assets is worth what the assets are worth, which is often very little once equipment is sold at auction and receivables are chased by someone the customers have never heard of.
Is senior lien the same as an interest rate?
Senior lien is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does senior lien apply to?
Term Loan, Business Line of Credit, Equipment Financing, Asset-Based Lending.
Is there a worked example of senior lien?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside senior lien?
Lien position, Purchase-money security interest, Second position, Subordination, Tax lien.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.