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Small Business Terms: What Is a General Security Agreement?

A general security agreement (GSA) represents a special agreement that allows you to secure a commercial business loan with certain types of collateral. If you default on the loan, your creditor may reclaim the asset noted in the security agreement as a repayment.

These agreements can secure current or future debts, and the underlying property can be tangible assets of your business, including:

  • Machinery
  • Equipment
  • Inventory

Investors may use intangible assets as a guarantee for the loan, such as:

  • Accounts receivable
  • Trademarks
  • Intellectual property
  • Stocks
  • Bonds

Who Offers General Security Agreements?

Corporations typically act as the guarantor on GSAs, though partnerships, LLCs, and occasionally individuals may also issue these agreements as investors for your business. Have a professional or attorney look over your security agreement, as GSAs can be complicated and filled with legal jargon. Ensure the agreement correctly lists all your information and understand what happens if you default. You don’t want any surprises when it comes to legal documents.

Imagine your GSA says you owe a minimum of 10% of your company’s revenue every month to pay off your loan. This means that if your firm makes $30,000 in one month, you owe the lender $3,000 on your loan balance. The next month, you make $50,000, which means you owe $5,000 on your loan balance. Watch out for minimum payments regardless of your revenues. You may end up owing more to the GSA than the standard percentage based on your revenues for a particular month.

Keep a close watch on how much you owe on the GSA per month, and set aside the amount you owe to the lender or investor so you don’t default. This also helps you track expenses and profits more accurately. QuickBooks Online makes it simple to perform analyzes and make reports on a regular basis to decide if you want to increase prices or volume to keep your profit margins stable.

Utilizing GSAs is just one way to help your company grow 7 million customers use QuickBooks. Join them today to help your business thrive for free.

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