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#438510 - 10/11/05 03:44 PM Security Agreement with no perfection
countrytink Offline
Junior Member
Joined: Feb 2004
Posts: 48
Illinois
I have a request to prepare a Security Agreement on an existing loan. We already have a Sec. Agmt that is 5 years old on inventory/equipment, and our UCC filing was completed and a UCC-3 done to continue for another 5 years. I've been asked to prepare a "new" Security Agreement with no new UCC-1. The reason is that "the language in the orignal Security Agreement has probably been changed or modified over the last 5 years" and a new Sec. Agmt. would accommodate those changes. I've never heard of this and don't know if this is really necessary on all our commercial/ag loans. Don't know if there are legal issues for this either. Language changes on documents is not uncommon, but I don't remember redoing documents on existing loans because of any changes.

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#438511 - 10/11/05 04:03 PM Re: Security Agreement with no perfection
HRH Okie Banker Offline
Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
What is the consideration of having the customer signed a new Security Agreement on an existing loan?
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#438512 - 10/12/05 09:37 PM Re: Security Agreement with no perfection
countrytink Offline
Junior Member
Joined: Feb 2004
Posts: 48
Illinois
There would be no "consideration" if it is a renewal note; If a new loan was done to consolidate the original note done 5 years ago plus additional working capital, the new working capital would be the consideration.

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#438513 - 10/13/05 10:19 PM Re: Security Agreement with no perfection
HRH Okie Banker Offline
Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
Sorry - I didn't catch that there was a renewal in process with this. We prepare new Security Agreement as a standard when doing renewals. I'm of the opinion that a new Security Agreement is always good when giving new money. In my opinion that documents the collateral for the new money in an ironclad way.
_________________________
Just working here until I get my letter from Hogwarts.

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#438514 - 10/14/05 05:17 PM Re: Security Agreement with no perfection
Anonymous
Unregistered

Thanks Okie Banker. Just want to clarify, do you do a new Security Agreement on renewals with no new money? Of, a new Sec. Agreement only when new money is involved. Thanks for your help

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#438515 - 10/18/05 02:04 PM Re: Security Agreement with no perfection
Dream Dancer Offline
Member
Joined: Sep 2005
Posts: 84
Texas
We do a new Security Agreement on all renewals, with or without new money. As stated earlier, laws change and therefore, so do the terms on the Security Agreement (even though collateral description language may not change). It also eliminates any potential conflict over what collateral the Borrower/Debtor "intended" to secure the debt with. In addition, by signing the new Security Agreement, the Borrower/Debtor is confirming that they still own the collateral and have the right to pledge it (a circumstance that could change over time).
I wouldn't recommend getting a new Security Agreement on existing, unmatured loans just because the original was done five years (or more) ago without consulting your bank counsel.

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#438516 - 08/02/06 09:00 AM Re: Security Agreement with no perfection
Tom at HOME Offline
Diamond Poster
Joined: Oct 2005
Posts: 1,139
Consideration, or value as the code calls it, can be as simple as giving the obligor more time, and no new money need be given.

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