In a secured financing, the borrower's payment and performance obligations are secured by a security interest over all or some of the borrower's assets (collateral) in favor of the lender.

A perfected security interest means:

There are many categories of assets in which the borrower can grant a security interest under the Uniform Commercial Code (UCC) including, without limitation, general intangibles, accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, securities accounts, investment property, letter-of-credit rights, money and intellectual property.

Security interests in most types of personal property can be perfected by filing a properly completed UCC-1 financing statement (UCC-1) in the appropriate filing office for the borrower. The most common exceptions are deposit accounts, money and letter-of-credit rights. Filing the UCC-1 serves as public notice of the lender's security interest. The UCC-1 is not meant to be a summary of the underlying financing transaction or the security agreement.

A UCC-1 may be amended, assigned or continued by filing a UCC-3 financing statement (UCC-3) that refers to the underlying UCC-1. Unless continued, a UCC-1 lapses five years after filing. If a lender wants to extend the duration of a UCC-1 that perfects its security interest in collateral, it must file a UCC-3 continuation statement within six months before the expiration of the UCC-1.

In addition, a UCC-1 can be terminated by filing a UCC-3. UCC-3s used for this purpose are known as UCC-3 termination statements. After the borrower repays all of its outstanding obligations under its loan agreement and the loan agreement is terminated, its counsel should ensure that the UCC-3 termination statement is filed so that the previously filed UCC-1 is removed from the record.

Before funding and taking security over the assets of a borrower, a lender typically need assurance that the borrower's assets are only encumbered by liens that are permitted by the lender. One of the ways a lender finds out about existing liens is by conducting lien searches.

This Toolkit includes continuously maintained resources to provide information on: