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Secured Party (Lender):
[Lender’s Name], a [business entity type] organized and existing under the laws of the state of [State], with its principal place of business located at [Lender’s Address]. -
Debtor (Borrower):
[Borrower’s Name], a [business entity type] organized and existing under the laws of the state of [State], with its principal place of business located at [Borrower’s Address].
Both parties, having the legal capacity to enter into this Agreement, agree as follows:
1. Grant of Security Interest
1.1. The Debtor hereby grants the Secured Party a security interest in the following described collateral (“Collateral”):
- Business Equipment: [List of specific business assets such as machinery, office equipment, or tools]
- Inventory: [Description of goods, products, or raw materials used in business operations]
- Accounts Receivable: [Outstanding invoices and future receivables]
- Real Estate (if applicable): [Legal description of property]
- Other Business Assets: [Any additional commercial property subject to the security interest]
1.2. This security interest is granted to secure the payment and performance of the following obligations (“Secured Obligations”):
- [Specify the loan, credit line, or financial obligations secured]
- [Principal loan amount, interest rate, and repayment schedule]
1.3. The Secured Party shall have a first-priority lien on the Collateral until all Secured Obligations are satisfied in full.
2. Representations and Warranties of Debtor
2.1. The Debtor represents and warrants that:
- The Debtor is the legal and rightful owner of the Collateral and has full rights to grant this security interest.
- The Collateral is free from liens, encumbrances, or claims, except as disclosed in this Agreement.
- The execution and performance of this Agreement do not violate any existing agreements or legal obligations.
3. Covenants of Debtor
3.1. The Debtor agrees to:
- Maintain the Collateral in good working condition and not allow it to depreciate unnecessarily.
- Not transfer, sell, or otherwise dispose of the Collateral without prior written consent from the Secured Party.
- Maintain adequate insurance coverage for the Collateral, naming the Secured Party as a loss payee.
- Provide the Secured Party with financial statements or other business records upon request.
- Notify the Secured Party of any changes in business operations that may affect the Collateral.
4. Default
4.1. The following events shall constitute Default under this Agreement:
- Failure to make any loan payment when due.
- Failure to maintain required insurance coverage on the Collateral.
- Unauthorized sale, transfer, or encumbrance of the Collateral.
- Filing for bankruptcy or insolvency by the Debtor.
- Any legal judgment or lien placed on the Collateral that negatively affects the Secured Party’s interest.
5. Remedies Upon Default
5.1. If the Debtor defaults, the Secured Party may:
- Declare all Secured Obligations immediately due and payable.
- Take possession of the Collateral without prior notice, if permitted by law.
- Sell, lease, or dispose of the Collateral, applying the proceeds to the outstanding debt.
- Pursue legal action for any remaining deficiency balance after the sale.
- Suspend or terminate any additional credit or funding to the Debtor.
6. Insurance Requirement
6.1. The Debtor agrees to maintain commercial property insurance with the Secured Party named as a loss payee. Required coverage includes:
- Property Insurance – Coverage of at least $[Amount] for the Collateral’s full value.
- General Liability Insurance – Minimum coverage of $[Amount] for business operations.
- Business Interruption Insurance (if applicable).
6.2. The Debtor shall provide proof of insurance to the Secured Party upon request and ensure that no lapse in coverage occurs.
7. Governing Law and UCC Compliance
7.1. This Agreement shall be governed by and construed under the laws of the state of [State].
7.2. The Secured Party shall file a UCC-1 Financing Statement with the appropriate state agency to perfect its security interest in the Collateral.
8. Miscellaneous Provisions
8.1. Amendments – Any changes to this Agreement must be in writing and signed by both parties.
8.2. Severability – If any provision is deemed invalid, the remaining provisions shall remain in full force and effect.
8.3. Waiver – Failure to enforce any provision shall not constitute a waiver of future enforcement.
8.4. Entire Agreement – This Agreement represents the complete understanding between the parties and supersedes all prior agreements.
9. Notices
All notices required under this Agreement shall be in writing and sent via certified mail, email, or in person to the following addresses:
-
Secured Party (Lender):
[Lender’s Name]
[Lender’s Address]
[Email Address] -
Debtor (Borrower):
[Borrower’s Name]
[Borrower’s Address]
[Email Address]
10. Signatures
IN WITNESS WHEREOF, the parties have executed this Commercial Security Agreement as of the date first written above.
Secured Party (Lender):
By: ___________________________
Title: __________________________
Date: __________________________
Debtor (Borrower):
By: ___________________________
Title: __________________________
Date: __________________________