Security Interest
A contingent property right held by a creditor in personal property of a debtor that secures payment or performance of an obligation. Foundation of secured commercial lending, equipment financing, working-capital lines, asset-based lending. Governed by UCC Article 9.
A security interest is a contingent property right held by a creditor (the "secured party") in personal property of a debtor (the "collateral") that secures payment or performance of an obligation. If the debtor defaults, the secured party may, subject to UCC procedural requirements, take possession of and dispose of the collateral to satisfy the obligation. Security interests in personal property are governed by Article 9 of the Uniform Commercial Code, codified in Texas at Tex. Bus. & Com. Code Chapter 9.
Distinguished from real-property liens
UCC Article 9 does not govern security interests in real property, those are governed by Texas mortgage law and real-estate-lien statutes. Article 9 covers all kinds of personal property: tangible (goods, inventory, equipment, fixtures) and intangible (accounts receivable, instruments, chattel paper, deposit accounts, investment property, general intangibles).
Three lifecycle stages
Attachment (§ 9.203): the security interest becomes enforceable against the debtor when (1) value has been given by the secured party; (2) the debtor has rights in the collateral; and (3) the debtor has authenticated a security agreement describing the collateral, or the secured party has possession or control of the collateral.
Perfection (§ 9.308): the security interest becomes enforceable against third parties, typically by filing a UCC-1 financing statement with the Texas Secretary of State, but also by possession (for tangible collateral) or control (for deposit accounts, investment property, electronic chattel paper). See Perfection.
Priority and enforcement (§§ 9.317–9.339, 9.601–9.628): the secured party's rights against competing creditors are determined by the UCC priority rules (generally first-to-file-or-perfect wins), and on default the secured party may take possession and dispose of the collateral under the procedural requirements of Part 6.
Purchase money security interest (PMSI)
A PMSI is a special category of security interest taken to secure the purchase price of the specific collateral (or to enable acquisition of the collateral). § 9.103. PMSIs receive priority over previously-perfected general security interests in the same collateral, subject to specific timing and notice requirements. § 9.324.
Security interests are foundational to commercial lending, equipment financing, working-capital lines secured by accounts receivable and inventory, asset-based lending. Inadequate documentation or perfection failures convert secured creditors into unsecured creditors in bankruptcy, with severe consequences for recovery. Sophisticated practice involves careful collateral description, timely UCC-1 filing, monitoring of debtor name changes and asset transfers, and continuation filings before the five-year lapse.