This agreement is used with a credit agreement if the lender wishes to have a guarantee for the repayment of the loan. As a general rule, if the borrower is late in the loan, the collateral can be sold and the proceeds can be used to repay the money owed for the loan. A GSA is only used if the personal property (not real estate) is used as collateral. If a loan is covered by real estate, a mortgage is required. A General Security Agreement (GSA) is a document that records a security that a debtor enterprise makes available to its creditor through a certain group of assets or all of the entity`s assets. The GSA registers the conditions that include the creditor`s right to register his interests in the Personal Securities Registry (PPSR), so that there is a public rating of this financial interest for the assets of the debtor entity. Many lenders are reluctant to enter into agreements that would jeopardize their ability to obtain adequate compensation if the borrower was late. Entrepreneurs seeking financing from multiple sources can find themselves in difficult positions when borrowers need security arrangements for their assets. In particular, small businesses may have few real estate assets or assets that can be used as collateral to secure credit. While a General Security Agreement (GSA) does not establish a loan, a loan document may contain a GSA AA. The debtor grants the lender interest for the protection of personal property. The property then becomes “guarantees”, and the lender then becomes a “secure party”. Collateral is described in the GSA and can range from a given piece of land to all of the debtor`s current or future assets.
The GSA will contain clauses relating to default and how the secured party can manage collateral in the event of default by the debtor. In insolvency, the first to register in the PPSR is generally a priority, unless there is an act of subordination between secured parties that changes the priority or the guarantee is not valid. The description of the warranties and the accuracy of the registration of title on the PPSR are important. In the event of significant anomalies, the warranty may be invalid. In Canada, the security interests of personal property are governed by provincial legislation. Priority generally depends on the registration of security interest in the province`s Personal Security Registry. Registration of the interest of the safeguard is a separate process from the conclusion of a GSA. A general security agreement defines the conditions under which your personal property can be kept as collateral for a loan. Companies are usually guarantors of GSA, although partnerships, LLCs and, sometimes, individuals can also establish these agreements as investors for your company. Let a professional or lawyer check your security agreement, as ASGs can be complicated and filled with legal jargon.