In this issue of Community Banker, we return to one of the most common and critical questions in lending: how to properly secure a loan under Article 9 of the UCC.

YOU ARE ASKING …
Q: What are the core steps a lender must take to ensure a loan is properly secured, perfected, and protected against competing creditors?

A: A valid security interest begins with a consensual agreement between lender and borrower, memorialized in a signed security agreement. From there, perfection depends on the type of collateral — for example, filing a UCC-1 financing statement, obtaining a control agreement, or taking possession. Priority then turns on timing: the first to perfect generally wins, unless a purchase money security interest gives another creditor super-priority. Understanding these basics is essential to protecting your bank’s interests and avoiding costly priority disputes.

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