A floating lien is a way for a business to put down collateral on a loan. Collateral backs up the loan in case a business can’t pay it off, so the lender can seize the collateral if regular payments stop. For example, a small business like a retailer can use inventory as collateral to obtain a small business loan. The inventory your business has in stock might shift (or float) — so it might go from warm sweaters in the winter to graphic T-shirts in the summer — and so the value of the inventory also changes. That’s why it’s considered a floating lien.