When it comes to asserting ownership over their assets, Australian businesses should be well placed compared to international peers. Unfortunately, many small firms are still losing money and missing out on low-cost business financing opportunities because they are failing to use a key facility their government has provided.
The introduction of the Personal Property Securities Register (PPSR) in 2012 brought Australia bang up to date when it comes to property law, by allowing easy online tracking of ownership rights. Now it includes leased goods too.
But the system is only as good as the data that goes into it. Australian businesses must use the PPSR to provide added security in their business transactions.
The PPSR is a tool for businesses
Some of the publicity around the PPSR has centred on the protection it affords to private car buyers. And the name itself suggests it’s for personal property. Don’t be distracted by that: the PPSR is a great resource for businesses and can be used not just to protect assets but to improve cashflow and improve business finance.
That’s not to say that businesses shouldn’t use the PPSR to check any major property they are buying, to ensure that it is not subject to financing. If it is, the finance company could still repossess the goods from your business if the person you bought them off defaults on their obligations.
But the PPSR really comes into its own when you’re selling. As a business owner, you want to make major sales but there’s always a risk when delivering goods: some customers might try to avoid paying, or might be unable to pay.
Use the PPSR for retention of title
The PPSR allows you to register your ongoing interest in the goods or assets you are selling on ‘retention of title’ terms. Should the customer default or go broke before they have fully paid you, this will make it much easier to simply take back the goods in question. If you aren’t registered, your stuff may well be sold to pay other, secured creditors, who will actually have priority over you.
A very similar situation now applies to leasing, renting or hiring out goods – provided the lease or hiring arrangement was entered into on or after 20 May 2017 and is for at least two years.
Registering your assets can help business financing
Because the PPSR allows you to make a clear and enforceable claim on all your assets, even when they are not physically in your possession, it can help you get a better business loan. For example, you might no longer have to rely on an unsecured business loan. In fact, a solid register of assets which you have recently sold is a great basis for looking at an even better and cheaper form of financing: debtor finance. Whether you choose factoring or flexible invoice discounting, this form of business lending can be a great way of managing cash flow as well as raising serious funds up front for investment.
Double edged sword
One word of caution regarding the PPSR: now that the register is in place, simply adding a retention of title clause in your contract or invoice no longer protects you on its own. If you don’t make a registration, your retention of title clause is unlikely to stack up against others when you need to rely on it. Those businesses who are using the register will simply have priority over you. Find out more about the Personal Property Securities Register on www.ppsr.gov.au/ – you can’t afford not to use it!