To keep a complete inventory of its paint products, PI purchases large quantities from its distributor. Because of the large quantity of inventory, the PI owners want to borrow money to pay for the inventory. Their bank, First State, is willing to loan the money to purchase the inventory provided the bank has a security interest in the inventory.

All PI's inventory moves in and out quickly from PI's business, so the PI owners do not fully understand how the bank's security interest in the inventory works.

Pat and Gale asked you to make a summary of the issues related to PI's questions about First State's security interest.

1. Analyze and explain:

(a) the type of security interest First State would have in PI's inventory if it loaned PI the money to purchase inventory, and

(b) how that security interest would be perfected, according to the requirements under Article 9 of the Uniform Commercial Code (UCC).

2. In PI's business where inventory is constantly moving quickly in and out of PI's storage facility, how can a security interest be maintained on inventory moving in and out of PI's storage facility?