The security agreement is a very important document. It specifies your lender's rights and duties regarding the collateral if you do not repay the loan. Generally, the security agreement will cover all these types of collateral. You will generally have possession of the collateral that is subject to the security agreement. For example, if your loan is secured by your equipment, the equipment will remain in your possession.
Lenders protect themselves by perfecting their security interests.
A security interest in property other than real estate is perfected by filing a document known as a financing statement with the Illinois Secretary of State. The financing statement describes the collateral that is subject to the security agreement. Financing statements are public documents, and anyone can examine them. The financing statement constitutes notice to all subsequent lenders that your lender has a security interest in the collateral described within the statement. The UCC provides that whoever files the financing statement first will also be repaid first if the collateral is sold to repay the loan.