Purchase Money

Security Interest (PMSI)

Definition

What is a PMSI?

A PMSI exists when a secured party (e.g. lender/financer) provides funding to a debtor for the purpose of obtaining specific collateral, such as equipment, inventory, or consigned goods.  The funding must be provided solely for the purpose of purchasing the PMSI collateral. 

 

When this occurs, and if the proper procedures are followed (next slide), the secured party can obtain a first priority security interest in the collateral.  This allows a PMSI secured party to go to the “front of the line”, even if there is an existing creditor (e.g. a blanket lien holder) who holds an earlier perfected security interest.