What is a security interest in accounts receivable and how does a lender perfect it?

A security interest in accounts receivable gives a lender rights over the money a corporation is owed by its own customers, treating those receivables as collateral for a loan or credit facility. This is especially common in revolving credit facilities, where a corporation borrows against the value of its outstanding invoices as a source of ongoing working capital.

Because receivables are intangible personal property rather than physical goods, a lender generally perfects a security interest in them by registering a financing statement under Ontario's Personal Property Security Act describing the receivables as collateral, rather than by taking physical possession, which isn't practically possible for this kind of asset. The registration is typically part of a broader general security agreement covering receivables along with other business assets, rather than a standalone filing just for receivables alone, though it can be structured either way. Because a lender's confidence in receivables-based financing depends heavily on the accuracy of the corporation's own accounts receivable records, lenders in this kind of facility often build in ongoing reporting and verification requirements as part of the loan terms, separate from the PPSA registration itself.