The blank promissory note provided here is one of two alternatives you can use when compiling your Security Agreement
Goods offered as collateral can either be kept by the Lender or remain with the Borrower.
Note the two options in paragraph 13. They cater for the event that there may not be enough money to repay the loan after the sale of the goods. For example, the goods simply devalued over time as is the case with some electronic goods or they may be damaged.
It is important for both parties to discuss this possibility beforehand and to come to an agreement.
The form on this page caters for the Borrower to keep and insure the goods. We also supply an alternative agreement where the Lender takes possession of the collateral.
To access our other free sample documents and promissory note forms and for additional guidelines please click here.
1. Whereas the Borrower executed a Promissory Note in favor of the Lender on the ______ day of _________________20____ in the principal amount of $________(____________________________). In consideration of this Note and as inducement to the Lender to extend a loan to the Borrower, the Borrower grants the Lender a security interest in the following goods:
(hereinafter referred to as "the Collateral")
2. The Collateral shall be kept at the following address:
(hereinafter referred to as "the Premises")
3. The Borrower warrants that the Collateral shall not be removed from the Premises without prior written consent by the Lender.
4. The Borrower warrants that he/she is the lawful owner of the Collateral, that it is free of any and all encumbrances and that no other party has any right to the Collateral.
5. The Borrower agrees not to sell, dispose of or transfer the rights to the Collateral to another party without the prior written consent of the Lender.
6. The Borrower shall insure the Collateral against all risks with a recognized insurance company at his/her cost. The Borrower shall furnish proof of such an insurance policy to the Lender.
7. The Borrower waives all defenses based on suretyship or impairment of collateral.
8. The Borrower shall effect all maintenance and repairs to the Collateral at his/her cost where necessary in order to keep the Collateral in the condition at which it was first offered as Collateral.
9. The Borrower shall effect at his/her cost the filing of a financing statement (UCC) at the relevant public offices within 5 (five) days of signing this agreement and shall furnish proof of such filing to the Lender.
10. Upon default by the Borrower under the terms of the Note and within 3 (three) days of demand by the Lender, the Borrower shall deliver the Collateral to the Lender, failing which the Lender may enter the Premises and take possession of the Collateral.
11. The Lender shall then have the right to sell the Collateral in any manner which he/she may deem fit and to apply the proceeds to the repayment of monies due under the Note.
12. The Lender agrees that proceeds from the sale of the Collateral shall first be applied to repayment of monies due under the Note and that any surplus money shall be transferred to the Borrower.
13. The Borrower agrees that he/she shall remain liable for any shortfall if the proceeds from the sale of the Collateral are not sufficient to repay all monies due under the Note.
13. The Lender further agrees that where the proceeds from the sale of the Collateral are not sufficient to repay all monies due under the Note, such shortfall shall be for the Lender's account and the Borrower shall have no further obligations under the Note.
14. No relaxation, indulgence, waiver, release or concession extended to the Borrower by the Lender and no delay or omission in the enforcement or exercising of the Lender's right under the Note shall affect the rights of the Lender under this security agreement.
15. This agreement shall be binding upon and accrue to the benefit of the parties, their successors, legal representatives and assigns.
16. This agreement shall be construed, interpreted and governed in accordance with the laws of the State of _______________ and should any provision of this agreement be judged by an appropriate court of law as invalid, it shall not affect any of the remaining provisions whatsoever.
Signed at ________________ on this _______ day of _____________________20___.
Lender's Signature: _________________________________ who warrants his/her full authority to enter into this agreement.
Borrower's Signature: _________________________________ who warrants his/her full authority to enter into this agreement.
Signed in the presence of:
(1) Witness Name _____________________________
(1) Witness Signature __________________________________
(2) Witness Name _____________________________
(2) Witness Signature __________________________________
Upon full and final settlement of the promissory note, a release of the Security Agreement should be issued by the Lender to release the attachment of collateral as security.
The blank promissory note on this page and our other free promissory note templates are for informational purposes only and legal counsel must be consulted before entering into any agreement.