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A Hypothecation Agreement lets you pledge assets as collateral for a loan while keeping possession of them. It's commonly used in Philippine banking when borrowers need financing but want to continue using their property, equipment, or inventory during the loan period.

Under Philippine banking regulations, these agreements must clearly specify the pledged assets, loan terms, and both parties' rights. The lender gains a legal claim to the assets, but can only seize them if the borrower defaults. This arrangement differs from a regular pledge since you maintain physical control of your collateral while still accessing needed funds.

Consider using a Hypothecation Agreement when you need immediate business financing but can't afford to give up your essential assets. This arrangement works particularly well for Philippine businesses that rely on expensive equipment, inventory, or vehicles to generate income - like manufacturing companies, retailers, or transport operators.

The agreement becomes valuable when traditional collateral arrangements would disrupt your operations. For example, if you run a delivery service, you can secure a loan using your fleet as collateral while continuing daily operations. Just ensure the pledged assets' value meets local banking requirements and your financial statements demonstrate reliable income for loan servicing.

• General Commercial: Basic hypothecation agreements used for business loans, typically covering inventory, equipment, or accounts receivable as collateral
• Real Estate: Specialized agreements for property developers or landlords, allowing them to use buildings or land as security while maintaining occupancy and operations
• Fleet/Vehicle: Customized for transport companies, covering multiple vehicles while allowing continued commercial use
• Stock/Securities: Used by investment firms and traders, allowing securities to be pledged while retaining trading rights
• Agricultural: Tailored for farming enterprises, covering crops, equipment, and future harvests under Philippine agricultural lending programs

• Commercial Banks: Draft and enforce hypothecation agreements, verify collateral value, and monitor compliance throughout the loan term
• Business Owners: Pledge their assets while maintaining operational use, ensuring regular loan payments and proper asset maintenance
• Legal Counsel: Review terms, ensure compliance with Philippine banking regulations, and protect client interests during agreement formation
• Corporate Treasurers: Manage company assets under hypothecation, maintain financial records, and coordinate with lenders
• Bank Compliance Officers: Monitor adherence to BSP guidelines and ensure proper documentation of hypothecated assets

• Asset Details: Prepare complete descriptions, valuations, and documentation of all property being hypothecated
• Loan Terms: Gather specific loan amount, interest rates, payment schedules, and duration from your Philippine bank
• Business Records: Compile financial statements, tax returns, and registration documents to prove ownership and financial capacity
• Insurance Coverage: Secure appropriate insurance for hypothecated assets as required by Philippine banking regulations
• Digital Template: Use our platform to generate a compliant agreement, ensuring all mandatory elements meet BSP requirements

• Identification Section: Complete details of lender, borrower, and clear description of hypothecated assets
• Loan Terms: Specific amount, interest rates, payment schedule, and duration under Philippine banking standards
• Rights and Obligations: Detailed responsibilities for asset maintenance, insurance, and usage restrictions
• Default Provisions: Clear terms for what constitutes default and lender's enforcement rights
• Security Interest: Legal language establishing the lender's claim on assets under Philippine secured transactions law
• Execution Block: Proper signature spaces, witnesses requirements, and notarization details

A Hypothecation Agreement differs significantly from an Asset Purchase Agreement in several key ways, though both deal with valuable assets. The main distinction lies in ownership and control: hypothecation lets you keep using your assets while borrowing against them, while an asset purchase transfers complete ownership.

• Control and Possession: In hypothecation, the borrower maintains physical possession and use of assets; with asset purchase, the buyer takes full control
• Purpose: Hypothecation serves as loan security while maintaining business operations; asset purchase permanently transfers ownership for a direct sale
• Duration: Hypothecation agreements last until loan repayment; asset purchases are permanent transfers
• Legal Rights: Under Philippine law, hypothecation creates a security interest, while asset purchase transfers all rights and title