The security package behind an acquisition loan is usually two separate registrations doing two separate jobs — one reaching the business and its assets, and a second, only where a personal guarantee exists, reaching the individual behind the deal.
Key takeaways
A treadstonelaw.ca note on how a lender registers against an acquired business describes the standard structure directly: “most commercial lenders financing a business acquisition register a general security agreement against the business itself under Ontario’s Personal Property Security Act,” giving the lender “a registered interest in the target’s equipment, inventory, and other personal property.” The same note is explicit about where that registration stops: “this registration attaches to the business and its assets, not to the individual borrower personally.” A buyer who has not personally guaranteed the loan is not automatically exposed by this registration alone — the general security agreement is a claim against the corporate borrower's property, structurally separate from the individual behind it. See the general-security-agreement glossary entry for the concept on its own.
The same source sets out what changes once a personal guarantee is in the file: “if the individual behind the purchase has given a personal guarantee, which is common for a newly acquired small business without its own credit history, the lender may also register directly against personal assets, such as a mortgage or charge against real property.” This is a second, distinct registration, not an automatic reach-through from the business-level security agreement — and, as the source notes, “whether both layers exist, and how far each reaches, depends entirely on what security the specific loan agreement and guarantee actually require.” See how the guarantee itself gets negotiated for what a borrower can typically do to limit how far that second layer reaches.
Where the loan runs through the Canada Small Business Financing Programme, the programme’s own guidelines set out a defined ranking scheme for what it calls primary security: a first-ranking security interest is the norm, with provisions for alternate security, equal-ranking security, and a specific rule allowing a 30-day window for equal-ranking arrangements. The guidelines also address the “highest available rank” a lender must take where first ranking is not obtainable, an after-acquired property clause reaching assets the business acquires after the loan closes, and a separate consideration for a borrower and landlord that are not at arm's length. A further category the guidelines address, additional security, sits alongside this primary security and is a separate registration in its own right. Nothing in the sourced material here quotes the detailed operative conditions attached to each of these named mechanisms — the headings and structure are confirmed; the specific tests within each should be confirmed against the guidelines directly for a given file.
A general security agreement that reaches only the assets a business owns on closing day would be a shrinking claim from the moment the loan is advanced — equipment ages and is replaced, inventory turns over, receivables are collected and new ones created. An after-acquired property clause is what keeps the lender's security current with the business as it actually operates, reaching new assets as the business acquires them rather than freezing the collateral pool at a single historical date. This is also why a lender's registered interest under a general security agreement is described as reaching “the business and its assets” broadly, rather than an itemized list fixed at closing — the registration is designed to track the business, not a snapshot of it.
Everything above describes the personal-property-security framework used across common-law Canada, where security interests are registered under each province's own PPSA-style statute. Quebec does not use this framework; it operates under its own civil-law property and registry regime, a different legal system rather than a provincial variant of the same one. Nothing in the sourced material for this article addresses that regime, and it should never be assumed to mirror the common-law structure described here. An acquisition where the target holds assets in Quebec needs Quebec-qualified counsel brought in specifically on how security is taken and registered there.
A lender is financing the $1,750,000 purchase of a commercial refrigeration servicing company through a combination of a conventional term loan and a CSBFP-backed facility. At closing, the lender registers a general security agreement against the newly incorporated acquisition company, covering its equipment, service vehicles, parts inventory and accounts receivable, together with an after-acquired property clause reaching future vehicles and equipment the company buys as it grows. This registration is filed under the applicable province's personal property security legislation and attaches to the corporate borrower and its property.
Because the buyer's own liquidity does not cover the lender's full comfort level on its own, the lender also asks for a personal guarantee from the buyer, capped at 50% of the outstanding balance, unsecured, consistent with the CSBFP guidelines' own rule that an unsecured guarantee up to the original loan amount is permitted but a guarantee secured by the guarantor's collateral can make the loan ineligible. No separate mortgage or charge is registered against the buyer's personal real property, because the guarantee itself remains unsecured. Two years later, when the company acquires two additional service vehicles, no new registration is needed to bring them within the lender's security — the after-acquired clause in the original general security agreement already reaches them, which is precisely the gap that clause exists to close.
Not on its own. It attaches to the business and its assets, not to the individual borrower personally; personal exposure comes from a separate personal guarantee, and any registration reaching personal assets is a second, distinct step tied to that guarantee.
No new registration is generally needed for assets the clause is drafted to reach — that is the specific function of an after-acquired property clause, keeping the security current with the business without a fresh filing every time an asset is replaced or added.
No. Quebec operates a separate civil-law property and registry regime rather than the personal-property-security framework used elsewhere in Canada, and a target with Quebec assets needs that regime assessed by Quebec-qualified counsel rather than assumed to mirror the common-law structure.
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