Security Agreement: Definition, Overview, Key Elements
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What is a Security Agreement?
A security agreement is a legal document that provides a lender a security interest in property or an asset that is promised as collateral. It gives the legal claim to the collateral to the creditor in case of a default by the borrower.
A transaction that uses a security agreement is often referred to as a ‘secured transaction’ where the grantor assigns the grantee (typically a lender) a secured interest in the collateral.
You can read more on security agreements here .
Terms Contained in a Security Agreement
A basic security agreement should have the description of the parties involved, the collateral and the statement of intention of providing security interest along with signatures from all parties. However, there are other terms that you might come across in a security agreement:
- Warranties : Warranties or covenants could include conditions agreed upon by both parties. For instance, common warranties include that the debtor must notify the secured party if the property’s value changes, the debtor must maintain the collateral in a good condition, and the property cannot be used in violation of federal, state or local laws.
- Collateral description: The security agreement should describe in detail the asset or property being held as collateral under the agreement. This should include specific listings, quantity of collateral, categories of collateral and description by type.
- Types of collateral: Collateral can be of various types such as inventory, farm products, accounts, stocks, or bonds, and this must be specified in the security agreement.
- Security interest : Security interest attachment must be used for completing security agreements. For this, an exchange of value must occur, the debtor should enjoy rights to the collateral and the debtor must be able to authenticate the security agreement through a signature. The security interest must also be perfected, which means that the secured party can claim promised collateral even in the event of debtor’s bankruptcy. This can be achieved through filing financing statements.
- Priority : In case of multiple parties, priority must be set for the secured parties involved. Generally, the first secured party is given priority. Priority can be achieved by filing a financing statement before other parties.
- Default : The security agreement should define what would be considered a default. These can be theft or improper use of collateral, failure to abide by other obligations, or evidence that provided collateral was false.
- Remedies : The remedies section can provide remedies for creditors to recover losses in case of default from the borrower.
You can read more on components of security agreements here .
Article 9 of the UCC: Security Agreements
Article 9 of the Uniform Commercial Code (UCC) is adopted by all fifty states. It governs secured transactions in which security interests are taken in personal property. Article 9 regulates the creation and enforcement of security interests in movable property, intangible property, and fixtures.
Transactions in which security interests are taken in real property are regulated by real property laws that vary among jurisdictions and not by Article 9. Article 9 regulates interests in personal property as collateral for any outstanding debt. Collateral could include any of the following:
- Inventory (such as raw materials held by business for sale or lease)
- Fixtures (items attached to a real property that if removed from it would require extensive reconstruction)
- Equipment (goods other than inventory)
- Vehicles (cars, buses, etc.)
- Stocks
- Bonds
- Personal possessions
- Accounts (such as promissory notes or insurance policy proceeds)
- Intangibles (such as software rights)
You can read more on Article 9 here .
Types of Security Agreements
Security agreements can be used to specify a collateral that is already in possession of the debtor, an intangible collateral or an after-acquired property.
- Collateral: Collateral can be of various types as discussed previously. A security agreement can be oral if the collateral is already in the physical possession of the secured party or the lender.
- Intangible Goods: Often collateral can be intangible, such as software rights or intellectual property. It is crucial to provide description of intangible collateral in writing.
- Floating Liens: Floating liens can appear in security agreements. These may not be in debtor’s possession at the time of the agreement’s commencement. It can involve acquired property, proceeds from a collateral’s disposition, and future advances.
- After-acquired property: An after-acquired property specification includes any new property acquired or bought after the agreement is signed. For instance, if the security agreement includes after-acquired property and the debtor promises all automobiles owned by the borrower, then even if the borrower buys new automobiles after signing the agreement, the new automobiles will be collateral.
You can read more on types of collateral here .
Image via Pexels by Shane
Why Businesses Use Security Agreements
Businesses depend on secured transactions for growth. Getting creditors to provide loans can be tough for individuals. Security interest provides reassurance to creditors that they will not suffer losses. The debtor also benefits from a low interest rate in presence of a collateral.
Security agreements provide a legally binding document outlining all terms under which debt can be secured and remedies if the debtor defaults. Businesses use this to ensure they do not suffer losses.
Are you wondering what a security agreement looks like? Here is a sample security agreement .
Security Agreement vs. Mortgage
A security agreement provides a legal title transfer from the borrower to the lender in while leaving equitable rights of the property with the debtor. The lender then provides the loan. Till the borrower is repaying the loan, they keep exclusive right of possession and the right of redemption which means that the lender cannot sell or alter the property. Once the repayment is completed, the debtor can have the collateral back. If the debtor defaults, the lender can gain all rights to the property, as laid under the security agreement.
Mortgage is different from a security agreement. A mortgage is used to secure the lender’s rights by placing a lien against the title of the property. Once all loan repayments have been made, the lien is removed. However, the buyer doesn’t own the property till all loan payments have been made. While mortgages provide security, similar to a security agreement, the property in question doesn’t already belong to the debtor.
You can read more on security agreements and mortgages here .
Get Help with a Security Agreement
Do you have any questions about a security agreement and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from finance lawyers and security lawyers who specialize in security agreements.
See Real Security Agreement Projects
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Meet some of our Security Agreement Lawyers
Keidi C.
Keidi S. Carrington brings a wealth of legal knowledge and business experience in the financial services area with a particular focus on investment management. She is a former securities examiner at the United States Securities & Exchange Commission (SEC) and Associate Counsel at State Street Bank & Trust and has consulted for various investment houses and private investment entities. Her work has included developing a mutual fund that invested in equity securities of listed real estate investment trusts (REITs) and other listed real estate companies; establishing private equity and hedge funds that help clients raise capital by preparing offering materials, negotiating with prospective investors, preparing partnership and LLC operating agreements and advising on and documenting management arrangements; advising on the establishment of Initial Coin Offerings (ICOs/Token Offerings) and counseling SEC registered and state investment advisers regarding organizational structure and compliance. Ms. Carrington is a graduate of Johns Hopkins University with a B.A. in International Relations. She earned her Juris Doctorate from New England Law | Boston and her LL.M. in Banking and Financial Law from Boston University School of Law. She is admitted to practice in Massachusetts and New York. Currently, her practice focuses on assisting investors, start-ups, small and mid-size businesses with their legal needs in the areas of corporate and securities law.
"Keidi was excellent; quick turnaround even during the Holidays. Thank you."
Jeremiah C.
Jeremiah C.
Creative, results driven business & technology executive with 27 years of experience (17+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.
"Jeremiah was pleasant to speak to and provided high quality work. I appreciate that he took the time to call me personally instead of a paralegal. Work delivered early and high quality! Highly recommend"
Scott S.
I specialize in business law and contracts, with an emphasis on commercial transactions and negotiations, document drafting and review, employment, business formation, e-commerce, technology, healthcare, privacy, commercial real estate, data security and compliance. Specifically, I've drafted, reviewed and/or negotiated thousands of MSA's, NDA's, TOS', SAAS, sales, service, managed services, referral, reseller, royalty, finder’s fee, employment, contractor, consulting, advertising, marketing, manufacturing, distribution, management, artist, author, agency, photography, rental, lease, vendor, partnership, website, platform, application, privacy, non-compete, non-circumvent, confidentiality, IP ownership and licensing agreements so I'm very familiar with these types of documents. Practicing law since 2006, I worked in-house before starting my own solo practitioner law firm in 2011. I've worked with individuals and start-ups, Fortune 500 companies, and every type of entity in between, always providing quality legal work that fits the exact needs of the person and/or business. I’m a graduate of the Benjamin Cardozo Law School and also have an English degree from Penn.
"Very helpful and appreciated being able to go over the contract revisions and clarification questions I had, thank you!"
Anna C.
I am a business attorney focused on practical, efficient contract drafting, review, and negotiation for healthcare organizations and growth-stage and established businesses. My work includes commercial agreements such as NDAs, MSAs/SOWs, leases, vendor and services agreements, SaaS, and employment and severance agreements. I partner closely with clients to identify key legal and business risks, deliver clear, business-minded redlines with concise issue summaries, and keep transactions moving. Clients value my responsive turnaround, judgment, and ability to balance risk with commercial objectives.
"Anna is always very responsive and on top of her projects. I have used her twice and will utilize her for future support."
Neil R.
Neil Rust is a transactional attorney with almost four decades of experience ranging across a broad range of fields, including M&A, finance, structured finance, VC and general corporate. Before moving to Oregon, Mr. Rust was a partner at the Los Angeles office of an international law for 26 years and the Century City office of a national law firm for 5 years. During his big firm tenure, Neil Rust gathered experience across multiple industries and enjoys counselling clients as much as drafting and negotiating.
Mike R.
Rusco Law combines big-firm expertise with small-firm personal attention to give a limited set of clients unparalleled representation and service. We provide: • Complete litigation services, from pre-filing demands through Supreme Court appeals. Extensive experience in commercial, employment, tribal, and personal injury matters. • Sophisticated business counseling with an emphasis on start ups, including formation, risk management, internal governance, employment policy, regulatory advocacy, and trademark/trade secret/patent protection. • Detailed contract negotiation, review, and compliance monitoring, including major construction and service agreements. • Full-spectrum legal support for principals and their families, including passionate injury representation, including childcare and playground accidents.
February 12, 2026
Chase L.
Chase D. Lambert, Esq. is a distinguished commercial business litigation attorney with a profound academic background and extensive experience in both transactional and litigation legal realms. A graduate of Kansas State University, Chase holds a Dual Major in Entrepreneurship and Finance, accompanied by a Minor in Economics, reflecting a multifaceted understanding of business dynamics and economic principles. Continuing his academic journey, Chase pursued his legal education at Pepperdine Law, where he further honed his expertise with an emphasis in Entrepreneurship through the prestigious Palmer Institute for Entrepreneurship in the Law. This specialized training equipped him with a nuanced understanding of legal intricacies within entrepreneurial ventures, empowering him to offer comprehensive legal solutions tailored to the unique needs of business clients. Throughout his career, Chase has demonstrated an unwavering commitment to excellence and client satisfaction. With a diverse clientele spanning across various industries, he has successfully navigated complex legal landscapes, adeptly handling a myriad of transactional and litigation matters with precision and efficacy. With a strategic mindset and a passion for advocating on behalf of businesses, Chase is dedicated to delivering unparalleled legal representation characterized by diligence, integrity, and a results-driven approach. His legal acumen, coupled with his understanding of business dynamics, renders him a formidable asset for clients seeking proficient legal counsel in commercial litigation matters. Beyond his professional endeavors, Chase remains actively engaged in the legal community, continuously seeking opportunities to stay abreast of emerging trends and advancements in commercial law. Committed to excellence in every aspect of his practice, he remains poised to provide comprehensive legal guidance and steadfast advocacy to businesses navigating the complexities of the legal landscape
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