Short Form General Security Agreement

As a business owner, it is important to secure your assets and protect your interests. One way to do this is through a short form general security agreement (SGSA). In this article, we will discuss what an SGSA is, why it is important, and how to create one.

What is a Short Form General Security Agreement?

A short form general security agreement is a legal document that outlines the terms and conditions of a security agreement between a debtor (the borrower) and a secured party (the lender). It serves as a security interest in assets such as inventory, accounts receivable, and equipment, which guarantees that the borrower will repay the loan.

Why is a Short Form General Security Agreement Important?

An SGSA is important for both the borrower and the lender. It protects the borrower`s assets by ensuring that the loan is secured by collateral and not just the borrower`s promise to repay. This is especially important for businesses that may not have established credit or have a high-risk profile.

For the lender, the SGSA provides a layer of protection and allows them to recover their investment in case the borrower defaults. Without an SGSA, the lender may not be able to recover their investment.

How to Create a Short Form General Security Agreement

Creating an SGSA can be done with the help of an attorney or legal document service. Here are some key elements that should be included:

– Identify the parties: The SGSA should identify the borrower and the lender.

– Describe the collateral: The SGSA should describe the collateral that the borrower is using to secure the loan, such as inventory, accounts receivable, or equipment.

– Payment terms: The SGSA should outline the payment terms, including the amount of the loan, interest rate, and payment schedule.

– Default and remedies: The SGSA should outline what happens in case of default, including the lender`s remedies and the borrower`s obligations.

– Governing law: The SGSA should specify the governing law that will govern the agreement.

In conclusion, a short form general security agreement provides protection for both the borrower and the lender. By securing the loan with collateral, it ensures that the lender can recover their investment in case of default. Creating an SGSA can be done with the help of an attorney or legal document service, and should include key elements such as identifying the parties, describing the collateral, outlining payment terms, specifying default remedies, and specifying governing law.