This security agreement is between , a(n) , an individual (the "Borrower") and , an individual, a(n) (the "Lender").

The Borrower is indebted to the Lender in the amount of (the "Loan"). The Loan is evidenced by a promissory note effective on the same date as this agreement (the "Note"), a copy of which is attached as Exhibit A. The Note and this agreement are collectively referred to as the "Loan Documents."

To induce the Lender to provide Loan to the Borrower as evidenced by the Note, the Borrower has agreed to enter into this security agreement for the benefit of the Lender and to grant the Lender a security interest in the Secured Property (as defined below) to secure the prompt payment, performance, and discharge in full of the Borrower's obligations under the Note.

The parties therefore agree as follows:


The Borrower grants to the Lender a security interest in the Secured Property (as defined in section 2 below) to secure payment of the Loan.


The secured property consists of all of the Borrower's interest as of the effective date of this agreement in the following properties and rights, wherever located, whether now owned or existing or later acquired and arising (the "Secured Property"): .


This agreement is made to secure payment when due of the Loan. The Loan includes:

  • (a) all obligations of the Borrower to the Lender under the Note;
  • (b) all amendments, renewals, or extensions of the above;
  • (c) all costs incurred by the Lender in establishing, determining, continuing, or defending the validity or priority of its security interest, or in pursuing its rights under this agreement or any other Loan Document or in connection with any proceeding involving the Lender as a result of any financial accommodation to the Borrower; and
  • (d) all other costs of collecting the Loan, including attorneys' fees.

The Borrower shall reimburse the Lender for these expenses immediately on demand, and until paid all costs shall bear interest at the highest per year rate applicable to the Loan and permitted by law.


The Borrower hereby reaffirms its obligation for the full and punctual payment and performance of the Note and all other obligations of the Borrower under the Note.


  • (a) The Borrower shall pay the Loan at the time and in the manner provided in the Note;
  • (b) The Borrower shall ensure that the Secured Property remains free of all security interests other than the rights of the Lender created by this agreement;
  • (c) The Borrower will defend the Lender's interest in the Secured Property against the claims of all other persons; and
  • (d) The Borrower may not transfer any Secured Property while this agreement is in effect without the prior written consent of the Lender, which consent may be withheld or given in the Lender's sole discretion.


On the effective date of this agreement, the Borrower will record this agreement and any security instrument creating a security interest on the Secured Property as required by law to protect the security interest of the Lender on the Secured Property. The Borrower shall pay all filing fees and associated expenses incident to this recordation.


The Borrower will be in default under this agreement if any of the following occurs:

  • (a) A default in the payment of the Loan or any of the obligations contained in this agreement or in the Loan Documents;
  • (b) Any representation made to the Lender by the Borrower proving to have been false in any material respect when made;
  • (c) Loss, theft, substantial damage, or destruction, or any sale or encumbrance to which the Lender did not consent in writing, of the Secured Property, or the making of a levy, seizure, or attachment on that property; or
  • (d) An Event of Default, as defined in the Note.


If an Event of Default occurs, the Lender may declare the Loan immediately due. In addition, the Lender will have all of the remedies set forth below, and these remedies are cumulative, so that the Lender may exercise one or more of these remedies until the Loan is paid in full without right of reinstatement, disgorgement, or repayment by reason of a preference, other creditor action, or by operation of law:

  • (a) cause all or any portion of the Secured Property to be registered in its name or the name of its nominee, designee, or assignee;
  • (b) have the exclusive right to receive all distributions with respect to the Secured Property;
  • (c) dispose of the Secured Property, at private or public sale, without advertisement of the time or place of the sale (or any adjournment), free of any right of redemption by the Borrower (this right of redemption being expressly waived by the Borrower), at the price, in the manner, and to the purchaser (including the Lender) that the Lender determines in its sole discretion. The proceeds of this sale will be applied to the Loan and the sale expenses (and the Borrower will remain liable for any deficiencies); or
  • (d) all other rights and remedies arising under this agreement or applicable law.


The Borrower assumes all responsibility for the Secured Property, and the Loan will not be affected by the loss, destruction, damage, or theft of any of the Secured Property or its unavailability for any reason. The Lender

  • (a) has no duty (either before or after an Event of Default) to collect any amounts related to the Secured Property or to preserve any rights relating to the Secured Property, and
  • (b) has no obligation to clean up or otherwise prepare the Secured Property for sale.

The Borrower remains obligated under each agreement included in the Secured Property. The exercise of the Lender of any rights under this agreement does not release the Borrower from its obligations under the agreements included in the Secured Property. The Lender has no liability under the agreements included in the Secured Property.


This agreement and all rights of the Lender under this agreement will terminate when the Lender is satisfied that the Loan and all other obligations of the Borrower under the Loan Documents are paid and performed in full without reinstatement, disgorgement, or repayment by reason of a preference, other credit or action, or operation of law.


If any provision of this agreement is inconsistent with any provision in the Note, the provisions of this agreement will control.the Note will control.


  • (a) Choice of Law. The laws of the state of govern this agreement (without giving effect to its conflicts of law principles).
  • (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in County, .


No amendment to this agreement will be effective unless it is in writing and signed by both parties.


  • (a) No Assignment. The Borrower may not assign any of its rights under this note. All voluntary assignments of rights are limited by this subsection.
  • (b) No Delegation. The Borrower may not delegate any performance under this note.
  • (c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made, or if both are made, in violation of this section, it is void and they are void.


  • (a) Counterparts. The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
  • (b) Electronic Signatures. This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.


If any one or more of the provisions contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in this agreement, unless the deletion of those provisions would result in such a material change as to cause completion of the transactions contemplated by this agreement to be unreasonable.


  • (a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this agreement shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this agreement: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
  • (b) Addresses. A party shall address notices under this section to a party at the following addresses:

  • If to the Borrower:
  • ,

  • If to the Lender:
  • ,
  • (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.


No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.


This agreement, together with the other Loan Documents, constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement with respect to the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.


The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement's construction or interpretation.


This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this agreement.


Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.


Each party is signing this agreement on the date stated opposite that party's signature.





Attach a copy of promissory note


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How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Security agreement: How-to guide

Successful businesses are built on big ideas and long-range goals, but without sufficient capital, those dreams may never be realized. Limited start-up funds can stop a company in its tracks. Business owners can underestimate the amount of money they will need to keep their organization running and close their doors before they’ve had a chance to get a market foothold. 

Many owners also expect their companies to turn a profit on Day 1, failing to consider expenses, competition, and the time it takes to build a customer base. 

Whatever the reasons, individuals and companies often must borrow money to keep their businesses afloat. They can turn either to large financial institutions or to friends, colleagues, and relatives for support.

A security agreement may prove more useful for a company looking to borrow money from less formal sources. Since commercial lenders may be reluctant to loan money to businesses without defined income streams and, moreover, will usually use their standardized forms. 

Nonetheless, the security agreement may provide a good starting point for any person or business who wants a loan or seeks information about loan terms and deal structures.

Borrowers who agree to sign security agreements may find loans more readily available to them. Lenders know that if a default occurs, they can sell the property used as collateral under the agreement. This protection may, in turn, make a borrower more comfortable with the loan arrangement. Nobody wants to default on a loan or force others to absorb losses on their behalf. 

Advantages of a security agreement 

When a security interest is granted, you can be sure you’re not leaving lenders out in the cold. A security agreement provides further assurance. It explains the specifics of how collateral can be claimed by the lender and what the borrower must do to protect the lender’s interest in that property.

A written security agreement minimizes confusion, misunderstanding, and error. It clearly outlines the parties’ expectations and obligations. In short, it promotes a successful and profitable business arrangement.

In order to create your security agreement in an easier way, you can rely on an online template. LegalZoom offers a comprehensive security agreement template that you can use anytime from any device. Just provide answers to the questions given, complete the form, and download it for free.  

Lender and borrower guidelines

Terms and conditions of security agreements

Before signing the agreement, decide exactly what the terms of your security agreement would be. For instance, you need to provide the following details:

  • How much property will be needed to secure the loan? 
  • What types of property can be provided as collateral?
  • What will be the security interest the borrower needs to pay the lender
  • If there are other loan documents and there is a conflict between documents, which document will take precedence?
  • What will the secured party receive during the course of the agreement?  

A good agreement is one that captures the intentions of the parties accurately. Take a moment to clarify the terms and conditions of your agreement before making them in written form.

Time for review 

Both the borrower and the lender should be given enough time to review the document. It will prevent any future advances or claims from both parties that they didn’t understand the agreement or the terms are wrongly quoted etc.

Role of the secured promissory note

Security agreements are generally used to supplement a secured promissory note. A secured promissory note is the borrower’s actual promise to repay the money it received.

Financing statements 

Security interests created for personal property can (and should) be recorded with financing statements (more specifically, a document called a UCC financing statement). 

Once a financing statement is completed and filed with the correct governmental authority, the lender’s interest in the property is considered “perfected.” 

This means that if future lenders also seek a security interest in the same asset, the lender with the perfected interest would have top priority and could take the property for themself after a default.

Witness and signature formalities 

Depending on the nature of your agreement’s terms, you may decide to have your agreement witnessed or notarized. This will limit later challenges to the validity of a party’s signature.

Two copies of the agreement should be signed. One will be kept by the lender, and the other will be retained by the borrower.

Take legal help

When you have doubt or feel that your agreement is complex, always seek the help of an attorney. They’ll help you draft a document that will meet your specific needs.

Key elements of a security agreement

The following instructions will help you understand the terms of your security agreement. 


In this section, you need to identify and introduce the parties concerned with the agreement. 

Provide the details regarding what type of organization(s) they are. In security agreements, one party is addressed as the “lender” and the other as the “borrower.” 

The lender is the party that loaned the money under the agreement, and the borrower is the one that is securing its promise to pay with this agreement.

Write in the effective date on which the agreement is signed.


Describes exactly what is being secured by the agreement. It simply states that the agreement is meant to ensure that the borrower will repay the loan the lender provided. 

Reaffirmation of loan

In this part, the borrower reaffirms its obligations under the loan. They promise to pay the full amount on time and without default.   

Secured property

This section lists the property or the financial assets that the borrower is using as collateral for the loan. 

Grant of a security interest

This part ensures the borrower’s repayment by providing the security interest for the property they have pledged as collateral. 

Event of default

It lists the situations in which the lender can declare that a default has occurred and can seek remedies from the borrower. These events include defaults in payment, loss or damage to collateral property, bankruptcy filings, or entries into receivership.

Remedies for events of default 

A description of the actions the lender can take if the borrower or debtor fails to pay or when their business is at a loss. During such scenarios, the lender can demand the entire amount of the loan and sell the collateral to repay that loan.


It states that the security agreement will terminate when the borrower has paid off the loan. 

Successors and assigns

States that the parties’ rights and obligations will be passed on to heirs or, in the case of companies, to successor organizations.


It lists the addresses to which all official or legal correspondence should be delivered. You need to provide both borrower's and lender’s mailing addresses here. 

Governing law

Allows the parties to choose the state and county laws that will be used to interpret the agreement.

Entire agreement

This section mentions that the parties are signing the security agreement as per the terms and conditions mentioned. However, having this clause will not prevent a party from arguing that other enforceable promises (or other loan documents) exist, but it will provide you some protection from these claims.

No implied waiver

This part explains that even if the lender ignores or allows the borrower to break an obligation under the agreement, it does not mean the lender waives off other obligations on the loan.


When more than one agreement is signed, there is a risk that the provisions of one may contradict the provisions of the other. As per this clause, it lets you designate which agreement will take control if there are conflicts between agreements.


This clause protects the terms of the agreement as a whole, even if one part is later invalidated.

Counterparts; electronic signatures

This section explains that even if the parties sign the security agreement in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same document. 


This part explains that the headings at the beginning of each section are meant to organize the document and should not be considered operational parts of the agreement.

Frequently asked questions

What's a security agreement?

Businesses often must borrow money from less formal sources, like friends, colleagues, and relatives. While a promissory note may help you secure a loan, a security agreement provides further protection and minimizes confusion, misunderstandings, and errors. It can also minimize risks for the lender and safeguard the integrity of the loan, as it clearly outlines expectations and fulfillment obligations.

What key information do you need to fill out your security agreement?

To complete your security agreement you must know the following details:

  • Who it's coming from: Determine if a business or individual is sending the document and have their name and contact information ready.
  • Who it's going to: Know who this document is going to and keep the name and contact details of the individual or business ready. If it's a business, know the business type (LLC, corporation, etc.).
  • Which state will govern it: Specify a state so it's clear what laws apply to the document.
  • Payment terms: Have information about the amounts to be paid and debts owed to the lender.
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