Perfection Strategies for Foreign Inventory Consignors Facing Secured Floating Charges
Foreign inventory consignors defeat prior floating charges by completing PMSI registry filings and notifying existing lenders before destination delivery occurs.
After Acquired Property
Meaning
Security agreements frequently feature provisions that automatically attach a lender’s lien to new assets the debtor obtains after signing the contract. The inclusion of after acquired property ensures that a creditor’s collateral pool grows alongside the distributor’s inventory and accounts receivable. This mechanism allows long-term credit facilities to remain secured without requiring the execution of a new security agreement for every incoming shipment.
Collateral Expansion
Financed distribution agreements typically require the retailer to pledge all inventory as collateral. This continuous expansion ensures that as new stock enters the warehouse to replace sold goods, the security interest attaches immediately. It protects the secured party from the natural depletion of inventory during daily commercial operations, maintaining a stable loan-to-value ratio.
Manufacturers use this continuous coverage to extend open-account terms to growing wholesale partners.
Priority Conflict
Competing claims often arise when subsequent suppliers demand super-priority purchase money interests. A conflict over after acquired property occurs when a secondary vendor files a specialized security interest to secure a specific shipment. This specific security interest defeats the general lender’s prior claim if the vendor complies with strict notification procedures.
Supply Clause
Distributors must examine their credit agreements to confirm which assets fall under this automatic lien.