In a financing agreement for personal property, what is recorded to create a lien?

In a financing agreement for personal property, a financing statement is recorded to create a lien. This statement is typically filed under the Uniform Commercial Code (UCC) to provide public notice of the secured party's interest in the personal property being financed. The filing serves as a way to inform other potential creditors that the secured party has a claim on the collateral, which can be essential in determining priorities in the event of bankruptcy or other competing interests.

The financing statement contains vital information about the debtor and the secured party, as well as a description of the collateral, which could include inventory, equipment, or other personal property. By filing this statement, lenders aim to protect their financial interest in the property being financed, ensuring that they have recourse to the collateral in case the borrower defaults on the loan.

In contrast, while a security deed is related to real property transactions and is used to create a lien on real estate, it does not apply to personal property financing. Equity statements and property affidavits serve different purposes and are not standard documents used to establish liens on personal property. This highlights the unique function of the financing statement within the context of personal property financing agreements.