Security agreement

A Security Agreement is a document used in financial transactions where the Grantor (typically the Borrower but can also be a Guarantor or Surety) assigns, grants and pledges to the Grantee (typically the Lender) a security interest in personal property which is referred to as the collateral. Examples of typical collateral are shares of stock, livestock, and vehicles. A Security Agreement is required to show the grant of the security interest which is required to attach before the Grantee may file a valid Financing Statement with the appropriate authority.

The Security Agreement sets out the various rights the Grantee will have with respect to the collateral, which are in addition to all other rights which the Lender may have by law, such as those rights contained in Article 9 of the Uniform Commercial Code which has been adopted in some form by each state in the United States. The Security Agreement also addresses issues such as permitted sales or other transactions with the collateral in the ordinary course of the Grantor's business and notices that may be required to be given by the Grantee to the Grantor if certain actions are taken. There are many forms available for purchase from legal supply and banker supply companies, in addition to software that will produce the Security Agreement according to specific user input.

A Security Agreement does not transfer any interest in real property (land), only personal property. The document used by lenders to obtain a lien on real property is a mortgage or deed of trust.