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Loans are quite common between businesses — whether that be with a bank or with another business.
There are two main types of business loans: secured and unsecured.
Secured loans, however, are seen as a lot safer for lenders. This is because a secured loan holds a security over the debt.
And, to effect that security in writing, you’ll need a General Security Agreement.
Why Do I Need A General Security Agreement?
A General Security Agreement sets out the terms by which your personal property can be held as security for a loan.
Typically, you should also have a proper Loan Agreement in place. And, in some cases, that Loan Agreement would have terms around security (if it is a secured loan).
However, on a practical basis, some businesses prefer to have an entirely separate General Security Agreement to be extra safe.
A General Security Agreement gives the lender the right to register their security interest and make a claim over the secured property in the event the borrower defaults on the loan.
So, if you’re ever providing a business loan with security, it’s a good idea to have a General Security Agreement in place.
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