In Australia, the hiring and rental industry, by its nature, requires a higher degree of asset and cash flow security. On the provision side, this is due to revenue streams depending not only on transactional volume, but also the maintenance, care, payment for and return of the individual goods leased or loaned. When purchasing for these businesses there is also asset risk – as you may not be aware of any existing financed debt on the purchased product. The Personal Property Securities Register (PPSR) is a vital component of the net of protection for both business and customer.
When leasing or hiring out goods, especially on a business-to-business level with higher volumes, the credit risk of trading partners can affect the security of the items loaned. If a customer you’ve loaned to goes broke and declares bankruptcy, you then must follow the insolvency proceedings as a creditor in order to either recoup the item or be compensated accordingly. Depending on what type of creditor you are, your chances of success can vary significantly. These goods may have been on-sold to pay off other creditors, or installed into other goods, making repossession or remuneration a complex exercise.
The credit risk to your business also goes the other way, during the goods purchasing process. When acquiring items, such as second-hand vehicles for the purpose of hiring out, there may be unknown, existing financed debt on the goods. Should this not be paid off, the items will be liable for repossession, potentially affecting your business’ ability to continue operation. A PPSR search may offer a level of protection for your business in this instance.
The importance of the PPSR for hire and rental businesses
The Personal Property Securities Register is an ‘online government noticeboard of security interests in personal property’. Put simply, it is a database of declared security interests on property including cars, goods, and company assets, designed to create safeguards against debt exposure, and form a hierarchy of creditors, in the event of an insolvency. A security interest is a type of right in personal property, as defined by the Australian Financial Security Authority (AFSA). Note that short-term leases, hires, or rental arrangements (under two years) are not affected by the PPSR.
As a hire or rental business, registering your goods on the PPSR, as either lender or seller, locks you in as a high-priority, secured creditor in the event of the insolvency of a trading partner or loanee. Say, for example, that you loan out a fleet of vehicles under a long-term operating lease – it is important to register your interest in each one individually. This instantly elevates your business in the hierarchy of creditors, and ensures far greater likelihood of success in being compensated should the trading partner declare bankruptcy. If left unregistered, then as an unsecured creditor, your likelihood of recoupment goes significantly down.
When purchasing second-hand goods, a PPSR check can also be used to identify existing security interests on that item prior to purchase. For example, you can use it to reveal if a motor vehicle you’re looking to purchase for your hiring fleet is free from current debt. This can significantly mitigate the risk of repossession on the item, allowing you to lease it out while reducing risk exposure to your business from pre-existing debt.
Simplify PPSR management with PPSRLogic
CreditorWatch’s PPSRLogic simplifies and streamlines both the registration of security interests, and the identification of any existing interests on an item. This crucial process of registering your business’s interest can too easily be left by the wayside, due to the known complexities and intricacies of the PPSR.
However, this innovative platform allows for a clearer and quicker process. It is even integrated with ApplyEasy, our customer onboarding platform, to ensure you don’t miss a registration. There is no need to try and do it on your own, and risk errors in the process, especially when these items are so crucial to operations. PPSRLogic helps to cement you as a secured creditor, with all rights therein, preserving the future of your business. Using this platform, existing registrations can be imported, while new registrations can be bulk-uploaded and easily managed – consolidating all your security interests.
Further, it assists in identifying any missing or incorrect information, such as misfiled ABNs or grantor details. It is simple and quick to perform a PPSR search on any items you’re planning to purchase. Registrations can be completed on one page, with one click, creating efficiency and clarity for you and your team. Considering the variety of security interests within the hiring and rental industry, as well as the risk of existing debt on purchased goods, the PPSR is an essential aspect of mitigating risk for your business.
Doing a PPSR check can be confusing, however we’re here to help. Contact us today to get a free demo of PPSRLogic and learn how you can use it to protect and grow your business.
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