Subordinating an SBA Lien (EIDL)


Subordinating an SBA Lien is a routine operation for United Capital Funding. Allow our expertise to guide you through this procedure as we establish a factoring relationship.

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United Capital Funding converts your business or government invoices into working capital quickly, giving you more time to grow and manage your business.

What is a lien?

A UCC-1 financing statement, also known as a lien, is a legal form that a creditor files to give notice that it has or may have a lien on the property of a debtor. At United Capital Funding, we place a lien on your company before you start factoring. This ensures that your company is in good standing to start funding.

How do I know what liens are on my business?

To perform a lien search, we recommend working with your local county clerk’s office or using a third party service like Experian.

What does it mean to subordinate a lien?

Subordinating a lien is a process where the initial financial entity (SBA or your bank) agrees to rank its lien position behind an incoming lien on the assets of the company (i.e. accounts and accounts receivable of your company).

Why should I request a subordination?

The most common reason is because you cannot borrow twice on the same asset – or double pledge on the same asset. Multiple liens limit your ability to access capital.

How to request an SBA subordination

1. To request that the SBA subordinates its lien on your existing EIDL loan, contact your assigned Disaster Loan Servicing Center to request a Lien Subordination and provide the following:

      • Application for lien subordination
      • Letter stating reason for lien subordination with a list of collateral to be subordinated
      • Copy of the fully executed Factoring Agreement
      • Copy of your SBA Agreement
      • Copy of the SBA’s lien search
      • Proof of Hazard Insurance

2. The SBA will also consider the following factors when making a subordination decision. Note that the SBA servicing center staff may require additional information:

      • The company’s credit worthiness
      • The purpose of the second credit facility
      • The terms of the second credit facility
      • The amount of the second credit facility
      • The impact of the subordination on the SBA’s lien position

3. The request to subordinate an SBA lien takes about ten to 14 business days. If approved, the SBA will email an executed Subordination Agreement to you (the company) or United Capital Funding (the financial entity) at the address provided.

4. Either you (the company) or United Capital Funding (the financial entity) will then return the signed Lien Subordination Agreement to the SBA using the email address listed in the Subordination Agreement.

NOTE: Subordination on SBA 7(a) and 504 loans is a separate process that may require additional information/documentation as requested by the SBA.