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Permanent Perfection of Purchase Money Security Interest - Explained

How to Continue a Purchase Money Security Interest

Written by Jason Gordon

Updated at September 26th, 2021

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Table of Contents

How does one continue perfection of or permanently perfect a purchase money security interest in non-consumer goods?Discussion QuestionPractice QuestionAcademic Research

How does one continue perfection of or permanently perfect a purchase money security interest in non-consumer goods?

A secured party who takes a PMSI in non-consumer goods has a grace period to file her financing statement. To establish permanent perfection beyond the temporary grace period, she must file the appropriate financing statement within 20 days of the purchaser receiving the asset. If the secured party files the financing statement during this period, her security interest is perfected and has priority from the date of the extension of credit. Her security interest also extends to any proceeds from a later sale of the assets. This is particularly important if the goods are inventory to the purchaser. Failing to file a financing statement within this period can cause the secured party to lose priority to conflicting secured parties or lien holders who later perfect their security interests in the collateral.

  • Relevant Law: 9-324(a)

Note: This rule is particularly important when the debtors assets are subject to an after-acquired collateral clause.

Next Article: Temporary Automatic Perfection in Proceeds from the Sale of Goods Back to: SECURED TRANSACTIONS

Related Topics

  • Perfection of a security interest?
  • Perfecting a security interest in personal property?
  • UCC-1 Statement
  • Security interest in real property (land)?
  • Register of Deeds
  • Automatic Perfection of a security interest?
  • Purchase Money Security Interest (PMSI) in consumer goods?
  • Purchase Money Grace Period for a PMSI in non-consumer goods?
  • Continue perfection of a PMSI in non-consumer goods?
  • Temporary Automatic Perfection in Proceeds from the sale of goods?
  • How is a security interest created in Assignment of Accounts Receivable and Contract Rights?
  • Perfect a security interest by Possession of the collateral?
  • Perfect a security interest by Control of collateral?
  • Perfect a security interest by Filing a Financing Statement?
  • Authorization is required to file a financing statement?
  • Where to file a financing statement?
  • Defeasance
  • Continuation Statement

Discussion Question

Do you think a secured creditor should have 20 days from the date the debtor takes possession of the collateral to file the security interest? Why or why not? Can you think of a situation where someone could be prejudiced by this right?

Practice Question

ABC Corp purchases equipment from 123 Corp and finances it for 12 months. The parties validly attach the security interest to the collateral. ABC Corp immediately sells all of its assets to XYZ Corp in a buyout. What must 123 Corp do to protect its security interest in the collateral? What would this mean for XYZ Corp?

Academic Research


purchase money security interest

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