General security agreement: what signing one means for your business
A general security agreement, often shortened to GSA, is one of the most common documents attached to business financing in Canada, and one of the least read. Here is what it does, what it can reach, how it shapes your next round of borrowing, and the questions worth asking before you put your name on it.
By North Financing Team · Published
This is general information to help you have a better conversation with a lender and with your own lawyer. It is not legal advice, and the wording of the document you are actually asked to sign is what counts.
What a general security agreement is
A security agreement is a contract in which a borrower gives a lender a claim on certain property as backup for repaying a debt. A general security agreement is the broad version: instead of naming one machine or one vehicle, it is usually written to cover most or all of the business’s personal property. That can include equipment, inventory, accounts receivable, vehicles and other business assets, and often property the business acquires after signing.
Compare that with financing secured by a single asset. According to the Competition Bureau, a term loan can be unsecured or secured by the asset it finances, and often has an amortization aligned with that asset’s useful life. A GSA goes further than that kind of one-asset security, which is why it deserves a slower read.
The pair: the agreement and the registration
A GSA rarely travels alone. The Government of Ontario explains that lenders and borrowers enter into security agreements, and that creditors who take a security interest in a debtor’s personal property should register a financing statement giving notice of it in the province’s Personal Property Security Registration system. Other provinces run their own registries. So when you sign a GSA, expect the lender to file a public notice against your business as well.
The two do different things. The agreement is the private contract that sets the rules. The registration is the public signpost that tells other creditors the claim exists. Our guide to PPSA registration explains the registry side, including how to look up what is already filed against your business.
What a GSA can reach, and what it usually does not
Every agreement is worded differently, so treat this table as a starting map for your questions rather than a statement of what your document says.
| Type of asset | Commonly within a broad GSA? | Worth checking |
|---|---|---|
| Equipment and machinery | Often | Whether leased equipment, which you may not own, is treated differently. |
| Inventory | Often | Whether you can keep selling stock in the ordinary course of business without asking first. |
| Accounts receivable | Often | How this interacts with any invoice financing you use now or might want later. |
| Business vehicles | Often | Whether a vehicle already financed elsewhere is excluded. |
| Property acquired after signing | Often, if the wording says so | Whether “after-acquired property” language is included. |
| Land and buildings | Not through a personal property registry | Real estate is normally secured by a separate mortgage document. |
| Your personal assets | Not by the business’s GSA alone | A personal guarantee is what usually puts these in play. See below. |
A GSA is not a personal guarantee
Owners often mix these up. A GSA signed by a corporation gives the lender a claim on the corporation’s property. A personal guarantee is a separate promise by you, as an individual, to repay if the business does not. They are frequently requested together, and they are not small asks. Studies cited by the Competition Bureau found that in the past three years, more than half of business owners were required to provide a personal guarantee to secure a loan, and one in four had to pledge their primary residence. If both are on the table, read each as its own commitment.
Before, during and after: a GSA over the life of a loan
Before you sign
Ask for the security documents early, not at the end. It is much easier to ask questions while you are still comparing options than after you have committed. If you have existing financing, check whether an earlier lender already holds a GSA, because a new lender will want to know.
While it is in place
Agreements often include ongoing promises, sometimes called covenants: keeping assets insured, not selling major assets outside normal business without consent, providing financial statements, or telling the lender about changes. Breaking one of these can count as a default even if every payment is on time, so keep a short summary of your obligations somewhere you will see it.
When you want to borrow again
This is where a GSA has the most practical effect. A second lender looking at your business will see the first lender’s registration and may ask how its claim would rank. It may ask the first lender to agree to a priority or subordination arrangement, limit its own security to a specific asset, or decline. None of that is unusual, but it can add steps, so plan for it. The way a lender reads your business credit file also matters at this stage; our guide to business credit in Canada covers it.
When the debt is repaid
Repaying the loan does not always clear the public record by itself. Ask the lender to discharge its registration and to confirm it in writing. Keep that confirmation with your corporate records.
Six questions to ask the lender
What exactly is covered?
Ask the lender to point to the collateral description and explain, in plain words, which assets it includes and whether anything is carved out.
Does it include future assets?
Broad agreements are often written to reach property the business acquires later. Find out whether yours is.
Is there a personal guarantee too?
A guarantee is a separate promise by you as an individual. Ask whether one is required and read it as its own document.
What happens if I want another lender later?
Ask what consent, priority arrangement or paperwork the lender would need before you take on other secured financing.
What counts as a default?
Missed payments are obvious, but agreements can list other triggers. Ask for the full list and what notice you would receive.
How is it released?
Ask whether the lender will discharge its registration once the debt is repaid, and how you will get written confirmation.
Lines of credit deserve a specific question of their own. According to the Competition Bureau, a line of credit is also called a demand loan because the lender can ask for full repayment at any time. If a line of credit comes with a GSA, make sure you understand how those two features work together under your agreement.
How this works through North Financing
North Financing is not a lender. It runs a platform that matches Canadian small and medium businesses with offers from independent third-party lenders, and those lenders decide approval, rates, terms and whether a GSA is part of the deal. Any offer and any funding agreement is a separate contract directly between your business and the lender. Offers are non-binding until you electronically sign a funding agreement with that lender, and the signed agreement governs the loan, fees and repayment terms.
In the North Financing portal, offers a business receives are shown side by side with term details, total payback and effective APR, so you can compare them. North Financing does not guarantee that an application will result in an offer and does not give legal advice, so have a lawyer review a GSA before you sign it. Learn how North Financing works, or start an application when it suits you.
Sources
This guide is general information for Canadian business owners, not financial, legal or tax advice. North Financing is not a lender. It matches businesses with offers from independent third-party lenders, and those lenders decide approval, rates and terms. Nothing here guarantees an offer, an amount or a timeline. Any examples are illustrative. The actual lender written terms govern any offer you receive.