legal
Subordination
Subordination is an agreement by one lender to rank its lien behind another lender’s lien on the same collateral.
Last updated Reviewed by ICG Funding
Definition
What it means.
Subordination agreements are common when a business with an existing blanket UCC takes on new financing. The incoming lender will either require the existing lender to subordinate, or the incoming lender will agree to file behind the existing lien.
Without a subordination agreement, the second-in-time lender takes second priority automatically, which usually means a higher rate or no deal at all. Subordination language is tightly negotiated and should always be reviewed by counsel on larger facilities.
Now what?
Get an offer that accounts for subordination.
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