In a challenging economic environment, loan defaults are on the rise, which can cause an increase in risk. Lenders know that filing liens can reduce financial risk and ease margin pressures in tight industries. Those who file their own liens have unique challenges. Here, we'll review seven different reasons why self-filing is challenging.
1. Need for efficient, scalable processes
Many businesses struggle to create consistency in the process across different departments when managing lien filings. They may also lack process automation tools, which go hand-in-hand with an internal management system. Without automation tools and integration capabilities, everything comes down to manual data entry, which produces inefficiency in an already strained workforce and leads to more data errors, including inconsistent numbers or information, differences in filing processes, and an inability to scale operations. Addressing this challenge is of utmost importance to ensure the smooth operation of your business.
2. Monitoring expiration and renewal dates
Liens must be renewed at the right time. Knowing your expiration and renewal dates is crucial to maintaining your position on a lien and protecting your interest against the debtor. You can lose your position if you fail to renew and the current lien filing expires. Most lien filings expire within five years, and you must file a new lien before that time ends or risk significant damage to your standing.
3. Managing lien amendments
In addition to monitoring and tracking your lien expiration and renewal dates, you must be aware of any amendments affecting your current lien portfolio. If any details about the collateral, debtor identification, or secured party information change, an amendment must be filed. If an amendment is not filed, your business lien risks a dispute or challenge to the lien's validity.
4. Subordination agreements
If a business agrees to subordinate its liens to another creditor, the liens must be correctly documented and filed. The subordination agreements attached to liens ensure that a stake in a lien is ranked by order of importance, so older debts are ranked behind each other for collecting payment. Mismanagement of this process can affect the priority of a lien, causing a loss of standing.
5. Keeping records of lien fillings and changes
Every business depends on the organization and proper record management to succeed. The finance industry is no different. You must maintain records of all filings, amendments, and correspondence related to lien filings. This is crucial to manage your lien positions effectively. Trying to do this on spreadsheets is nearly impossible. Businesses may struggle with building and maintaining this type of internal audit log, significantly as the volume of filings increases, along with the documentation for each lien filing.
6. Staffing and talent acquisition challenges
Unemployment remains at record lows. Finding new staff members and experienced individuals who can fill open roles in companies affects all industries, as everyone feels the strain of overworked teams and lower staff counts. It takes time to source, onboard, and train new employees, all while your day-to-day staffing needs continue to grow. Moreover, time is needed to train recruits in nuanced workflows, such as filing liens to support your business practices.
7. Creating a single point of access
To efficiently manage an entire portfolio of liens without missing renewal dates or amendments, you need an internal program to manage and automate your lien filing process. Many companies don’t have a single point of access to their lien information. With a single point of access, employees don’t need to keep up with different jurisdiction regulations or reach out to multiple state secretaries, and your employees only need to be familiar with one platform.
Conclusion
Understanding self-filing challenges is critical to maintaining your interest in liens and protecting your investments and claims. When you know your challenges, you are better prepared to devise solutions before they become major issues. However, working with a trusted lien management partner can significantly alleviate these burdens and help you avoid any complications from managing your lien workflow.
