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Glossary

What is Lien Position?

Lien position is the order in which lenders are entitled to be repaid from collateral if a borrower defaults. The lender in first position is paid first from the proceeds of the collateral, followed by second position and so on. Lenders in junior positions take on more risk, which can affect pricing and approval. Lien position usually follows the order in which liens were properly filed or recorded, though lenders can agree to change it through a subordination agreement.

Example

In an SBA 504 loan, the bank holds the first lien on the property and the CDC holds the second.

Related funding

Commercial Real Estate: Buy, refinance or improve the property you operate from.

Related terms

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