What is a security interest?

A security interest is a right that a secured creditor takes over collateral (i.e. the property) in return for providing a loan or other advance of value.

For example, a bank will take a security interest over a property when it loans a company money to buy that property.

There are two types of security interest:

  • Non-circulating security interests (such as land, plant and equipment)
  • Circulating security interests (such as cash, stock and debts owed to the company)