What is a "purchase-money security interest" (PMSI)?

A purchase-money security interest (PMSI) is a specific type of secured interest that allows a borrower to obtain goods using credit, and it is particularly associated with the purchase of those goods. This security interest is given to a lender or seller that provides financing for the purchase of specific collateral, such as inventory or equipment, and it grants the lender a security interest in that collateral.

In practice, a PMSI most commonly arises when a seller provides financing to a buyer for the acquisition of goods or when a lender loans funds to a buyer specifically to purchase goods. If the buyer defaults, the lender or seller with a PMSI can enforce their interest in the goods purchased with that credit, typically leading to more favorable treatment in the event of bankruptcy or default.

This definition highlights the critical aspect of a PMSI being directly associated with the acquisition of the goods, distinguishing it from other types of security interests that may not be tied to specific purchases. Thus, answer B accurately captures the essence of a PMSI as it pertains to obtaining goods with credit.