THE LAWS OF CREDIT AND COLLECTIONS

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SECURITY AGREEMENTS

You can obtain a security interest in goods that are shipped to a customer (not if shipped to the customer's customer).

A Purchase Money Security Interest is limited to the goods that you sell to that customer and the proceeds from the customer's sale of these goods to others.  

When you follow the procedure correctly (file a UCC-1 financing Statement and notify the secured lender, if any).  The security interest in your goods is ahead of the bank, even though the bank obtained a security interest first.

If you obtain a regular Security Interest in all of the customer's inventory, products, contracts, receivables, etc., then you become a secured party that is second to that of the secured bank.

In the event of a bankruptcy proceeding or a foreclosure by the bank, you should be paid more than the unsecured creditors.  You are a first secured party in your goods, so you can legally take them back, and you are second to the bank, in the event that any money is left to pay to you, after the bank  paid.

We prepare Security Agreements and UCC-1 financing statements for all states. UCC-1 Financing statements are filed in the state where the customer is located and where the goods are located. Each state has different requirements (filing fees, location for filing, forms, etc).