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Security Agreement Checklist

Step 1: Gather Information

As you complete your security agreement, you will need to provide certain relevant information. This includes the names and addresses of the parties, the amount and interest rate (if any) owed by the debtor, and collateral details. You may also need to include additional payment details, such as payment frequency, late fees, and prepayment requirements, if they are not already contained in a separate agreement.

Step 2: Answer Key Questions

Use the information you collected to complete the security agreement. We make this easy by guiding you each step of the way and helping you to customize your document to match your specific needs. The questions and information we present to you dynamically change depending on your answers and the state selected. Click below to get started.


Step 3: Review and Sign

It is always important to read your document thoroughly to ensure it matches your needs and is free of errors and omissions. After completing the questionnaire, you can make textual changes to your document by downloading it in Microsoft Word. If no changes are needed, you can simply download the PDF version and sign. These downloads are available by navigating to the Documents section of your account dashboard.

The agreement allows the parties to sign and deliver it to one another electronically. This means that it is not necessary for the parties to sign a single printed agreement. Instead, they may choose to both sign the same electronic copy using electronic signatures, or they may sign separate electronic copies and email them to each other.

When signing the document, be sure to follow any additional instructions related to signing and witnessing the document. Any such instructions will either be located next to the signature line or in the instructions attached at the end of the document.

Although using a notary is not required, it is recommended that you do so to ensure that you can prove the authenticity of the document. When using a notary, be sure to wait to sign the document until they are present.

Step 4: Distribute and Store Copies

At a minimum, all parties that sign the document should receive a copy once it is fully executed (everyone has signed). Other interested parties may need or want copies as well. Be sure to store your copy in a safe location. It is a good idea to keep both a physical and electronic copy.

Step 5: Perfect Your Security Interest

Three things must be present in order for the secured party to obtain a protected security interest in the collateral: 1) the secured party must pay for or give something of value in exchange for receiving the security interest, 2) the debtor must own the collateral or have proper authority over the collateral in order to pledge the security interest, and 3) the debtor must sign a security agreement. Once all three items occur, then the secured party will rightfully have a security interest in the collateral. This process is called "attachment" of a security interest. Assuming the first two items are present, the secured party should have an attached security interest when the debtor signs the security agreement.

Next, the secured party needs to "perfect" its security interest. This means that the secured party has taken steps to ensure that no other creditor has a prior claim over the collateral and that the secured party will be able to claim the collateral in the event that the debtor becomes insolvent or declares bankruptcy. While taking the step to perfect a security interest is not required by law, it is often the only way that the secured party can rest assured that its interest in the collateral is safe from other creditors.

You can perfect your interest by simply filing a short document, called a financing statement, in the debtor's state or local jurisdiction. If the debtor is an individual, this is the state where the debtor resides; if the debtor is a business, this is the state where the business was formed. While the rules vary by location, a financing statement normally only requires identifying the parties and providing a description of the collateral. In most states you can easily provide this information by completing Form UCC-1 and filing it with the Secretary of State's office. You can find your state's requirements online or by calling your state office.

Certain types of collateral may be perfected without filing a financing statement and simply by the secured party having possession or control over them. However, filing a financing statement is usually recommended as the more straightforward method of ensuring the secured party's interest is fully protected.

Step 6: Complete Related Documents

Other documents may offer additional legal protection. For example, those who use security agreements often incorporate promissory notes, loan agreements, and sales contracts into their existing business practices.


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