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A secured promissory note may include a security agreement as part of its terms. If a security agreement lists a business property as collateral, the lender might file a UCC-1 statement to serve as a lien on the property. A security agreement mitigates the default risk faced by the lender.
Often, secured parties use UCC-1 financing statement forms to achieve perfection of security interest outlined in a security agreement. Prepared and signed by both parties, this form includes the following information: The debtor's name (either the name of an organization or an individual taking on debt).
Security agreements can be used to specify a collateral that is already in possession of the debtor, an intangible collateral or an after-acquired property.
Intellectual property, including trademarks, is classified under the definition of general intangibles. One obtains a security interest in a trademark by obtaining a written grant of a security interest from the debtor.
In order for the security agreement to be valid, the borrower must usually have rights in the collateral at the time the agreement is executed. If a borrower pledges as collateral a car owned by a neighbor, and the neighbor does not know of and endorse this pledge, then the security agreement is ineffective.
For purposes of attachment, the debtor must "authenticate" a security agreement. In other words, the debtor must sign the agreement....The UCC specifies what must be contained in a financing statement:the name of the debtor.the name of the secured party; and.an indication of the collateral.
In general, the promissory note is your written promise to repay the loan and a security agreement is used when collateral is given for the loan.
Terms Contained in a Security Agreement A basic security agreement should have the description of the parties involved, the collateral and the statement of intention of providing security interest along with signatures from all parties.
A General Security Agreement (GSA) is a contract signed between two parties a creditor (lender) and a debtor (borrower) to secure personal loans, commercial loans, and other obligations owed to a lender.
Article 9 contains a statute of frauds which requires a security agreement to be in writing unless it is pledged. See § 9-203(1) of the code. A pledged security agreement arises when the borrower transfers the collateral to the lender in exchange for a loan (e.g., a pawnbroker).