What is Floating Lien?

Legal Definition
A security interest in a group of property that remains in place even after the exact items in that group of property change. Thus, a business can obtain loans and provide as the collateral a general security interest in its inventory or accounts receivable. The actual items of property can change over time (e.g., an inventory full of winter boots may become an inventory full of summer sandals), but a floating lien continues to assure the creditor that its loan is secured by valuable assets.
Legal Definition
A general CLAIM against a group of ASSETS rather than a specific asset, i.e., a pool of current and future ACCOUNTS RECEIVABLE or INVENTORIES rather than designated receivables or inventories. A BANK granting a LOAN may choose to use the floating lien to secure its exposure, particularly if the tenor of the loan exceeds the average maturity of the assets being financed. Also known as FLOATING CHARGE. See also SECURITY INTEREST.