Security Agreement

A Security Agreement is a legal document that creates a security interest in specified assets, giving a lender the right to seize those assets if the borrower defaults on a loan. The agreement identifies the secured party (lender), debtor (borrower), and collateral (specific assets securing the debt). In the United States, it works in conjunction with a UCC-1 financing statement filed with the appropriate government office to perfect the security interest and establish priority over other creditors. The collateral can include inventory, equipment, accounts receivable, intellectual property, or other assets. The agreement specifies the obligations secured, events of default, and the secured party's rights upon default, including repossession and sale of collateral. Security agreements are fundamental to secured lending, reducing lender risk and often resulting in more favorable loan terms for borrowers.