Salem National Bank v. Larry J. Smith

EASTERBROOK, Circuit Judge.

Purchase-money security interests usually take priority over earlier security agreements with after-acquired-property clauses. A purchase-money advance brings in a new asset, and because the security interest cannot exceed the value of the asset existing creditors are no worse off. At the same time, the purchase-money loan facilitates a transaction that might be too complicated to arrange if the purchase-money lender had to arrange for subordination agreements with all existing secured creditors.

Loans for the purchase of seed and the expenses of planting crops are…