An Excluded Assets Security Agreement: Understanding the Basics

When it comes to securing a loan or financing for a business, it’s important to understand the concept of an excluded assets security agreement. Essentially, this type of agreement outlines which assets of a company will be excluded from the security interest of a lender.

So, what exactly does this mean? Let’s break it down further.

What is an Excluded Assets Security Agreement?

An excluded assets security agreement is a legal contract between a lender and a borrower that specifies which assets of the borrower will not be considered collateral for any loans or financing. The agreement is typically included as part of a larger security agreement, which outlines the terms and conditions of the loan or financing.

Why do Excluded Assets Security Agreements Matter?

By specifying which assets are not included as collateral, lenders are typically able to offer borrowers more favorable loan terms, such as lower interest rates or longer repayment periods. This is because the lender is taking on less risk by not including certain assets as collateral.

For borrowers, excluded assets security agreements can be important in protecting valuable assets, such as intellectual property or equipment, from being seized by a lender in the event of default on a loan or financing.

Commonly Excluded Assets

While the specific assets excluded in an agreement will vary depending on the lender and the borrower, there are a few common types of assets that are often excluded:

– Cash and cash equivalents: This includes any liquid assets, such as bank accounts or investments.

– Intellectual property: This includes patents, trademarks, copyrights, and other intangible assets.

– Equipment critical to ongoing operations: This includes assets that are essential to the day-to-day operations of the business.

It’s important to note that while these assets may be excluded from the security interest of a lender, they may still be subject to other types of liens or claims in the event of default.

Final Thoughts

If you’re a business owner seeking financing or loans, it’s important to understand the concept of an excluded assets security agreement and how it can impact your business. By working with a knowledgeable lender and legal professional, you can ensure that your assets are properly protected and that you’re receiving the best possible loan terms.