What additional requirement is needed to qualify for a PMSI besides filing promptly?

What additional requirement is needed to qualify for a PMSI besides filing promptly?

• A. Lessor must pay for substantially all the equipment
• B. Lessor must insure the equipment
• C. Lessor must be the original vendor
• D. Lessor must file in multiple states

Answer: (A)

The main idea is what makes a financing arrangement a purchase money security interest (PMSI) in equipment. A PMSI arises when the secured party provides the funds to purchase the collateral. In addition to filing promptly to perfect the interest, the key requirement for a PMSI in equipment is that the lessor finances substantially all of the equipment’s purchase price. If only part of the price is financed, it wouldn’t qualify as a PMSI. Insurance, being the original vendor, or filing in multiple states aren’t defining requirements for PMSI status.

The main idea is what makes a financing arrangement a purchase money security interest (PMSI) in equipment. A PMSI arises when the secured party provides the funds to purchase the collateral. In addition to filing promptly to perfect the interest, the key requirement for a PMSI in equipment is that the lessor finances substantially all of the equipment’s purchase price. If only part of the price is financed, it wouldn’t qualify as a PMSI. Insurance, being the original vendor, or filing in multiple states aren’t defining requirements for PMSI status.