EIDL Collateral and MCA Filings
What the Blanket Grant Covers and How Priority Is Decided

A broad collateral description does not decide a contest between creditors.

A business holding an EIDL security agreement beside an MCA filing must identify the property covered, the validity of each claim, and the priority rules that apply before treating the word blanket as a complete analysis. Rarely discussed is what happens to proceeds after the original asset is sold.

The Grant Beneath the Word Blanket

In its SBA inspector general audit of delinquent COVID EIDL collection, the agency watchdog described blanket liens on business assets for loans above $25,000, covering property identified in the security agreement such as inventory and equipment. Real estate entered the picture, where available, for the largest loans. The actual grant remains the starting point for every asset review.

The lien attaches, if we are being precise, to the property described in the grant rather than to everything the business touches. Retrieve the executed security agreement with the note and amendments, and compare its description with the assets actually held. That decides nothing until counsel compares the grants.

Do not assume property owned by an individual is included because the business uses it. The ownership record with the identity of the granting party requires its own attention, and an amendment that increased the loan may have changed the documents without changing the memory of the owner.

Most owners learn the collateral description only when a sale is pending. I understand the timing.

Overlap With an MCA Filing on the Same Property

Identify assets the business leases or holds for another party before including anything in a proposed sale. Purchase invoices, lease schedules, and ownership records distinguish what the debtor owns from what it merely uses, and counsel needs that separation before advising on any transfer.

An MCA financing statement resembles a coat check ticket: proof that something was left, not proof of its value. The statement may describe property that overlaps the EIDL grant, or it may describe different property that requires its own explanation. Place the documents side by side and name the actual conflict, since the legal question concerns rights in particular property rather than a contest between product names.

Before directing customer payments elsewhere, before committing proceeds from an equipment sale, ask counsel to review the interests affecting those funds. What the owner sells, or encumbers, before that review can limit every option that follows. A funder may demand proceeds in order to establish priority by possession rather than by paper (the broker, who is paid to place debt rather than to resolve it, will rarely volunteer which filing came first).

Keep records of the original asset with any disposition. Whether a claim reaches proceeds as well as the property first described depends on the agreement and the governing law, and the text is not entirely clear on every proceeds question, which is part of the problem.

Filing Order and the Exceptions That Change It

New York UCC rules ranking conflicting claims to the same collateral provide that perfected interests generally rank by the earlier of filing or perfection, with continuity required and stated exceptions preserved. The state text in its 2014 revision keeps that structure intact. Counsel must still examine the events behind each interest rather than assuming the first loan funded supplies the answer.

The same framework distinguishes perfected interests from unperfected ones, and it preserves other priority provisions that turn on collateral type or method of perfection. A general comparison of filing dates should not decide a dispute governed by a special rule. You sign the second agreement and then you discover what the first one covered.

Obtain filing histories with any continuation, amendment, or termination affecting the property. The record should show whether each interest remained effective through the period examined. Keep consents and subordination agreements with the related documents, since an informal assurance never changes a recorded position.

The filing was first. It was also incomplete. Review and analyze the attachment and perfection evidence for each claimant before any ranking is stated, and compare and reconcile the histories rather than trusting the most recent page.

Federal Priority and Servicing Requests

Federal statute giving government claims priority in specified insolvency and estate settings applies in the circumstances it describes and excludes cases under Title 11 from that subsection. The provision should not be converted into a statement that the agency prevails in every collateral dispute.

SBA COVID era guidance on servicing requests for collateral actions provides distinct requests for release, substitution, and subordination. Identify the action the proposed transaction requires and retain the submission with the written determination.

The request form is the easy part.

Transactions Reviewed With Counsel and Private Negotiation

Delancey Street offers a free confidential initial review of business debt concerns, with emphasis on MCA obligations. An owner facing competing claims can ask which accounts fall within the services confirmed for the business.

The company provides debt settlement services and coordinates legal matters with independent counsel. It is not a law firm, and its engagement neither releases agency collateral nor settles legal priority. Counsel should ensure any required consent or release is obtained through the proper process.

We review the grants, identify the overlap, and construct a position that addresses both the contractual language and the practical need to use the property. Resist the urge to answer the dispute by paying the creditor who demands first. Any promise about proceeds, even casually given, can bind the strategy and later be used against the business.

The word blanket decides nothing. What the law describes as identifiable proceeds may matter more than the equipment on the floor. Whether this holds where deposit accounts are concerned is a question I cannot answer from this desk, since the audit found perfection gaps in the practices it examined without deciding any particular account.

An extremely broad description still requires analysis of the particular property and the competing claim, and an extremely feral race to the account helps no claimant. Simply preserve the approvals and completed filings so the business can establish the result without depending on memory.