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Security Agreement
Practical Law Glossary Item 9-382-3811 (Approx. 2 pages)
Glossary
Security Agreement
An agreement that creates or provides for a security interest (UCC § 9-102(73)).
In a financing transaction, a borrower borrows money from a lender and agrees to repay it with interest and to perform certain obligations. If these obligations are secured, the borrower grants a security interest over all or certain of its assets in favor of the lender. To create the borrower's security interest over its assets (known as collateral) in favor of the lender, a lender and a borrower enter into a security agreement. In a secured financing transaction, the security agreement fulfils two main purposes, namely:
- Satisfying certain requirements of the UCC for the creation and attachment of a security interest and provides for certain rights and remedies of the lender under the UCC.
- Reflecting the deal between the lender and the borrower concerning the collateral. The security agreement balances the lender's need to create and preserve its perfected security interest in the collateral and the borrower's need to use its assets and operate its business without interference.
For more information, see Practice Note, Security Agreement: Overview.