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Negative Pledge Agreement Defined

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What is a Negative Pledge Agreement?

A negative pledge agreement is a contract between a lender and borrower that prevents the borrower from pledging assets that would harm to lender's security. By entering into this type of agreement, lenders can be assured that if new loans are obtained by the borrower, their security interest will take precedence over any new obligation that the lender takes on. In other words, if a lender pledges the same collateral for two separate loans, the loan that was obtained first reserves the right to seize the collateral first.

The purpose of the negative pledge agreement is to protect the security interest of the loan that took place first.

Who Helps With Negative Pledge Agreements?

Lawyers with backgrounds working on negative pledge agreements work with clients to help. Do you need help with a negative pledge agreement?

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Susan T. on ContractsCounsel
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