Meaning
Residual personal property categories that exclude tangible goods, documents, instruments, money, or accounts. Commercial law classifies general intangibles as a broad basket for assets like patent rights and software code. These items are often used as collateral in asset based lending when physical equipment or inventory is insufficient to cover the loan value.
Valuation Difficulty
Assigning a monetary value to non-physical assets requires specialized appraisal because market prices are rarely transparent. Unlike commodities, general intangibles derive their worth from the future cash flows or legal protections they provide. A bank might apply a higher discount rate to these assets compared to accounts receivable due to the complexity of liquidating a brand name in a forced sale.
Lien Perfection
Securing a legal interest in these assets usually involves filing a financing statement in the appropriate jurisdiction. Because general intangibles lack a physical presence, the lender cannot take physical possession to protect their claim. The priority of the lien depends entirely on the date and accuracy of the public filing rather than the location of the asset.
Contractual Benefit
Rights to receive payment under a contract that has not yet been earned by performance fall into this category. These differ from accounts receivable because the service has not been completed.
