A purchase money security interest secures the price of the collateral it covers, or value given to enable the debtor to acquire it. It can defeat an earlier-filed blanket lien.
Goods other than inventory. Priority requires perfection at the time the debtor receives possession or within a short grace period afterwards — twenty days in most enactments. Missing the window costs the super-priority entirely.
Inventory. Stricter. The interest must be perfected when the debtor receives possession, and the purchase money lender must send an authenticated notification to holders of conflicting filed interests before the debtor receives the inventory, stating that it expects to acquire a purchase money interest and describing the inventory. The notification is effective for five years.
Proceeds. Purchase money priority extends to identifiable cash proceeds of non-inventory goods; for inventory it is limited, generally to identifiable cash proceeds received on or before delivery to a buyer.
Dual status. Where the obligation includes both purchase money and other advances, most enactments preserve purchase money status to the extent of the purchase money portion in commercial transactions.
Consignments are treated as purchase money inventory interests, which means a consignor who does not file and notify is subordinate to the consignee’s lender — a recurring and expensive surprise.