Basic Uniform Commercial Code
Purchase-Money Security Interest
- A security interest in goods is a purchase-money security interest:
- to the extent that the goods are purchase-money collateral with respect to that security interest;
- if the security interest is in inventory that is or was purchase-money collateral, also to the extent that the security interest secures a purchase- money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and
- also to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.
TL;DR: Someone gave you money to buy something, and you used the money to buy it.
Purchase-money security interests in goods other than inventory or livestock take over previously-filed security interests as long as the PMSI perfects within 20 days of the purchaser taking possession. UCC § 9-324(a).
- PMSIs only take over other security interests in inventory acquired after perfection. UCC § 9-324(b).
Sellers with PMSIs prevail over lenders with PMSIs.