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Security agreement
Also called grant of security interest, collateral agreement.
The contract in which a borrower grants a creditor a lien over described collateral; it is the document that creates the interest, separate from the UCC-1 that publicises it.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
It identifies the debtor and secured party, describes the collateral, states what obligations the collateral secures, and sets out events of default and the creditor's remedies. Attachment happens when value is given, the debtor has rights in the collateral, and the debtor has authenticated an agreement describing it. That is the moment the lien exists between the two parties.
Collateral descriptions do most of the work and are read closely afterwards. "All assets" or "all personal property now owned or hereafter acquired" reaches inventory, equipment, accounts, deposit accounts, general intangibles and things the business has not bought yet. A narrower description — one titled vehicle, one machine — reaches only that.
Cross-collateralisation clauses extend the same collateral to secure other obligations to the same creditor or its affiliates, present and future. Where that clause is present, paying off one facility does not release the collateral if another obligation to that creditor is still outstanding.
Where this one catches people
Owners look for a document called "UCC-1" among their signed papers and cannot find one, then conclude nothing was pledged. The UCC-1 is a public notice the creditor files; it does not need the debtor's signature and typically is not in the closing set. The grant is buried in the agreement they did sign, often several pages in, under a heading that does not say "collateral".
Where you will meet this term
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Security agreement — common questions
What does security agreement mean?
The contract in which a borrower grants a creditor a lien over described collateral; it is the document that creates the interest, separate from the UCC-1 that publicises it.
Where does security agreement catch people out?
Owners look for a document called "UCC-1" among their signed papers and cannot find one, then conclude nothing was pledged. The UCC-1 is a public notice the creditor files; it does not need the debtor's signature and typically is not in the closing set. The grant is buried in the agreement they did sign, often several pages in, under a heading that does not say "collateral".
Is security agreement the same as an interest rate?
Security agreement is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does security agreement apply to?
Merchant Cash Advance, Term Loan, Business Line of Credit, Equipment Financing, Invoice Financing, Asset-Based Lending.
Is there a worked example of security agreement?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside security agreement?
After-acquired property, Blanket lien, Cross-collateralization, Secured loan, Specific lien.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.