Purchase Money Security Interest is a lien granted by the issuer to secure indebtedness incurred as the cost of acquiring, improving or constructing property. It is applicable only to the acquired property and is generally non-recourse to the issuer.
Non-recourse means that if the secured assets fail to cover the cost of debt, the lender will not be able to make a claim on the issuer's remaining assets. PMSIs are generally used for smaller acquisitions such as office equipments, etc. There is usually a lock in period specified after which a PMSI can be attached to an asset after its acquisition. his period in most of the cases os set between 6 and 24 months. The lock in period is meant to prevent the issuer from liquidating the acquired assets in time of liquidity crises. The absence of this protection will act detrimental to long term lenders of the firms which have a high rate of asset turnover.