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A Hypothecation Agreement lets you borrow money while keeping possession of your assets, commonly used in Indonesian banking and finance. It's similar to a pledge but with a key difference - you can still use the property you've offered as collateral, making it popular for business loans and trade financing.

Under Indonesian Civil Code regulations, these agreements must specify the secured assets, loan terms, and rights of both parties. Banks often require hypothecation when issuing working capital loans, especially for manufacturers who need to keep using their equipment while it serves as security. The agreement gives lenders a legal claim to the asset if the borrower defaults.

Use a Hypothecation Agreement when you need financing but can't afford to give up control of your business assets. This arrangement works perfectly for Indonesian manufacturers who need working capital while keeping their production equipment running, or traders who want to use their inventory as collateral while still being able to sell it.

The agreement becomes essential when dealing with Indonesian banks for secured loans, particularly in trade finance or business expansion. It offers more flexibility than traditional collateral arrangements, making it ideal for businesses with valuable assets that generate regular income. Many companies use it during seasonal peaks when they need quick capital without disrupting operations.

• Basic Commercial Hypothecation: Used for standard business loans, covering fixed assets like machinery or equipment while allowing continued business use
• Trade Finance Hypothecation: Specifically designed for inventory and goods in transit, popular among Indonesian import-export businesses
• Stock Hypothecation: Covers marketable securities and shares, common in investment banking and corporate finance
• Floating Hypothecation: Applies to changing asset pools like inventory or receivables, ideal for retail and manufacturing sectors
• Project-Specific Hypothecation: Tailored for large infrastructure or construction projects, securing specific assets and equipment

• Commercial Banks: Draft and enforce Hypothecation Agreements as primary lenders, ensuring their security interests are protected
• Business Owners: Sign as borrowers, maintaining operational control of assets while accessing needed financing
• Corporate Legal Teams: Review and negotiate terms to protect company interests while meeting regulatory requirements
• Notaries: Authenticate agreements and ensure compliance with Indonesian Civil Code requirements
• Financial Advisors: Guide clients on optimal structuring of hypothecation arrangements and associated risks

• Asset Details: Compile complete descriptions of collateral, including serial numbers, locations, and current market values
• Loan Terms: Document the principal amount, interest rates, repayment schedule, and duration of the financing
• Ownership Proof: Gather all asset ownership certificates and registration documents required under Indonesian law
• Party Information: Collect legal names, business registrations, and authorized signatory details for all parties
• Usage Rights: Clearly define how the borrower can continue using hypothecated assets during the loan term
• Default Conditions: Specify triggers for default and enforcement procedures aligned with local regulations

• Party Identification: Full legal names, addresses, and registration numbers of lender and borrower
• Asset Description: Detailed specification of hypothecated property, including value and location
• Loan Details: Principal amount, interest rate, repayment terms, and duration of the agreement
• Rights and Obligations: Clear outline of asset usage rights, maintenance responsibilities, and insurance requirements
• Default Provisions: Specific conditions constituting default and enforcement procedures
• Governing Law: Reference to Indonesian Civil Code and relevant financial regulations
• Execution Requirements: Notarization details and authorized signatory provisions

The key differences between a Hypothecation Agreement and an Asset Purchase Agreement are fundamental to Indonesian secured transactions. While both involve assets, their purposes and effects differ significantly.

• Ownership Transfer: Hypothecation keeps asset ownership with the borrower while creating a security interest; Asset Purchase Agreements transfer full ownership permanently
• Asset Usage: Under hypothecation, borrowers continue using assets during the loan term; Asset Purchase Agreements terminate the seller's rights to use the asset
• Duration: Hypothecation agreements last until loan repayment; Asset Purchase Agreements execute a one-time permanent transfer
• Legal Purpose: Hypothecation secures financing while maintaining business operations; Asset Purchase Agreements facilitate complete asset sales and transfers
• Documentation Requirements: Hypothecation needs loan terms and security details; Asset Purchase Agreements require comprehensive transfer and warranty provisions