1. What is a Security Agreement?
A security agreement refers to a document that provides a lender a security interest in a specified asset or property that is pledged as collateral. Terms and conditions are determined at the time the security agreement is drafted. Security agreements are a necessary part of the business world, as lenders would never extend credit to certain companies without them. In the event that the borrower defaults, the pledged collateral can be seized by the lender and sold.
Why is it important?
a. Secured transactions are vital to growing a business.
b. Security interest provides reassurance to the creditor, who is then more likely to provide much-needed funding for a given debtor..
c. the debtor is more likely to obtain a low interest rate if some form of collateral is available to the creditor.
d. Security agreements play a central role in this arrangement by outlining the terms under which debt can be secured.
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