Businesses and people need money to run and fund their operations. There are rarely cases where entities can fund themselves, which is why they turn to banks and other investment sources for capital. Some lenders require more than just good word and interest payments. That’s where security agreements come into play. These are important documents drafted between both parties at the time the loan is advanced.

Security agreements often contain covenants that outline provisions for the advancement of funds, a repayment schedule, or insurance requirements. The borrower may also allow the lender to hold the collateral for the loan until repayment. Security agreements may also pertain to intangible property such as patents or receivables.