Blanket Lien
When you’re five, and you put a lien on your favorite blankie.
Okay, so...first off, what’s a lien? If you asked a friend for $100 to borrow, and your friend said, “hey man, you still owe me $20...why would I give you $100?” and you said, “okay, if I don’t pay you back, you can have my watch, which is worth at least $100” and your friend says “deal,” you just took out a lien on your watch.
A lien is basically a promise...that if you don't pay back the money you've borrowed, the lender will get something of yours as collateral.
So what’s a blanket lien? One that covers all the stuff you own (which means good for the lender, not good for the borrower).
If you borrowed money with a blanket lien on everything you owned, that means the lender could take all your stuff and sell it to get their money back. If you hear “blanket lien,” you should be afraid. Very afraid. It’s so scary it might make a good Halloween costume.
Related or Semi-related Video
Finance: What are Debt Service and Debt ...3 Views
Finance, a la shmoop. What is debt service and debt service ratios? Well debt
service is just the interest you pay on debt in a given year. Like you're [Definition written on a 100 dollar bill]
servicing the debt, like think about the oil demanded by a robot in a year she
demands to be serviced and the oil you serve her will you know quench her [Robot drinking oil]
thirst. Well debt service can be easy or it can
be hard, like whatever.com has 50 million bucks of 6 percent debt costing 3 [The debt service calculation is shown]
million a year to service. Well if whatever.com had 40 million bucks in [Vault full of money]
cash profits servicing its debt would then be easy and it would have a debt [Someone repeatedly pressing an easy button]
service ratio of 40 over 3 or 13 and 1/3 times coverage. Said another way the odds [The ratio calculation is shown]
that whatever.com would find itself in a position that it couldn't service
its debt are well very low. But think about the other side of the coin if [Somone about to flip a coin]
whatever.com had only 4 million dollars in cash profits well then it's debt
service ratio is 4 over 3 meaning that 75% of its cash flow leaves the company [Money going from whatever.com to the lenders]
and goes into the coffers of the kindly loving lenders who are nervous about the
company falling into default and going bankrupt which does not make the oil go
down easy... [Robot drinks oil and spits it out]
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