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Loans are quite common between businesses — whether that be with a bank or with another business. In 2025, many companies continue to rely on borrowing arrangements to support growth, manage cash flow, or take advantage of new opportunities.
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 interest over the debt, minimising risk for the creditor. For more insights on ensuring your contracts are rock-solid, you might also check our article on why a lawyer should review your contract.
And, to effect that security in writing, you’ll need a General Security Agreement.
What Is A General Security Agreement?
As mentioned, secured loans hold a security interest over a debt. If the borrower defaults, the lender has defined rights that can be enforced to recover the outstanding amount.
A General Security Agreement essentially records this promise or guarantee in writing. This ensures that all parties are legally bound to adhere to the security arrangement. It forms a crucial part of mitigating risk in the lending process and provides clarity on the obligations involved.
Why Do I Need A General Security Agreement?
A General Security Agreement clearly sets out the terms under which your personal property can be held as security for a loan.
Typically, you should also have a proper Loan Agreement in place. In many cases, that Loan Agreement stipulates the security terms if it is a secured loan. For additional guidance on structuring your contracts, you might want to have a look at our comprehensive contract guide.
However, on practical grounds, some businesses prefer establishing an entirely separate General Security Agreement for extra protection. This separation helps to clearly delineate the security interest from the primary loan terms, offering both parties enhanced clarity and certainty. It is also a useful document when registering your security interest for priority claims.
A General Security Agreement gives the lender the right to register their security interest on the Personal Property Securities Register (PPSR) and to make a claim over the secured property in the event the borrower defaults on the loan. It is advisable to keep up-to-date with any changes to PPSR requirements, as regulatory updates continue to evolve in 2025.
So, if you’re ever providing or receiving a business loan where security is involved, having a thoroughly drafted General Security Agreement in place is a wise precaution.
What Should A General Security Agreement Contain?
Like any other agreement, a General Security Agreement should be tailored to the unique requirements of your arrangement. It must comprehensively outline the terms and procedures to follow if the borrower defaults.
Standard terms typically include:
- How the security or collateral will be delivered
- The obligations of both the borrower and the lender
- Warranties or representations made by the parties
- An outline of the lender’s rights with respect to the security or property
- Clear procedures detailing what happens in the event of a default
- Conditions under which the agreement can be terminated
- Any requirements for notice before certain actions can be taken
For more detail on drafting effective terms, do consider reading our insights on business terms and conditions.
How Do I Register A General Security Agreement?
When you enter into a General Security Agreement, one of your first practical steps is to register your security interest on the appropriate property with the Personal Property Securities Register (PPSR).
This process requires a clear description of the secured property, the details of the parties involved, and the duration for which the security will be registered. With updated protocols in 2025, the registration process has become more streamlined, fostering quicker validation of security interests.
In other words, by registering your interest, you are officially notifying the PPSR of your arrangement, thereby ensuring your right to take possession of the secured property if necessary.
Who Needs To Sign A General Security Agreement?
Typically, the borrower is the party that must sign the agreement, as this serves as a written confirmation that you will provide the stipulated security should you fail to repay your loan as agreed. This signature is crucial in demonstrating your legal commitment to the security arrangement.
What Should I Consider Before Signing A General Security Agreement?
If you’re borrowing money and are asked to sign a General Security Agreement, consider the implications carefully. Reflect on how the agreement might affect your business activities or create unforeseen barriers. It is important that the extent of the security is directly proportional to the amount being borrowed.
Before signing, it’s strongly recommended that you have the agreement reviewed by a legal professional. This step ensures that the security interest is reasonable and does not excessively encumber your assets. For further advice on ensuring proportionality and protection in your contracts, see our resource on engaging experienced legal help.
Furthermore, entering into a General Security Agreement with one party can potentially limit your ability to offer security over the same assets to other lenders in the future. This aspect is particularly important if you plan to seek additional financing to support other areas of your business.
Staying aware of these considerations and discussing them with a legal expert will help safeguard your long-term business interests.
Additional Considerations for 2025
As regulatory and commercial landscapes evolve, particularly in 2025, it is imperative to remain updated with any changes affecting secured lending and property registration. New guidelines on security interests and evolving digital registration processes mean that your General Security Agreement should not only reflect the current legal framework but also anticipate future developments. For instance, integrating digital signatures and electronic submissions, as accepted by many financial institutions today, can further streamline and secure your contractual obligations.
Need Help?
If you need help with a General Security Agreement or wish to ensure that your business’s loan documentation is fully compliant with 2025 requirements, our experienced lawyers are here to support you. You can reach out to our friendly team on 0800 002 184 or [email protected] for a free, no-obligation discussion about your specific needs. Additionally, consider checking our comprehensive guides for further insights on structuring your business agreements effectively.
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