Security agreement

Definition

The contract that gives a lender its claim on the assets, before any filing.

Why It Matters

The UCC-1 everyone talks about is only the public notice; this is the document that creates the claim, and it is where the collateral is actually described. Read the schedule, not the summary, because the phrase that decides everything is whether it covers named assets or all assets now owned and later acquired, and the second version reaches equipment you have not bought yet. It also carries the default terms, which is what turns a missed covenant into a right to take the collateral, so the clause worth negotiating is the cure period and not the rate.

In numbers: An all-assets agreement on a $900,000 loan attaches to the $150,000 of equipment bought in year three as well. A lender financing that purchase separately comes first only with a purchase-money lien perfected within 20 days of delivery, and often needs the bank's consent too.