Bill owns a small factory,which manufactures seatbelt parts for the automobile industry.Although business has steadily increased for the past two years,the company still owes the bank a significant amount of money.In fact,to secure start-up monies,the company was required to provide a chattel mortgage to the bank including an after-acquired property clause.Bill becomes aware that a machine used to manufacture seatbelt parts has become available from a local manufacturer.However,Bill's company cannot pay cash for the machine and cannot provide the manufacturer with any security in relation to its existing assets.A special priority can in fact arise if the manufacturer reserves a security interest in the seatbelt-making machine itself.This interest is known as

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The manufacturer reserving a security interest in the machine being purchased by Bill's company would create a purchase-money security interest (PMSI). This type of security interest is given to a creditor who provides financing for the purchase of specific collateral, in this case, the machine, and gives the creditor priority over other creditors in case of default.

Bill Owns a Small Factory,which Manufactures Seatbelt Parts for the Automobile