Documentation should be prepared with what in relation to additional collateral?

• A. A standard security agreement
• B. A personal guarantee
• C. A simple promissory note
• D. A release of lien

Answer: (A)

When additional collateral is involved, you establish a security interest through a standard security agreement. This document creates and describes the lien on the collateral, binding both borrower and lender and outlining the rights, duties, and remedies if the borrower defaults. It’s the instrument that, along with the financing statement, perfects the lender’s claim to the assets pledged as security. A personal guarantee is a separate form of backing and doesn’t encumber assets directly. A simple promissory note records the debt itself without attaching collateral. A release of lien would remove an existing claim, not create it.