As a business owner, understanding the PPSR and how it can help you to protect your assets is very important. Any item that you sell to a customer that is financed is still your asset until it has been paid for in full. When you submit and maintain a registration in the PPSR you have priority access to have your goods returned to you. This registration is something that any business offering goods on credit absolutely must do.
What is the PPSR and Why Does my Business Need it?
PPSR is an acronym which means Personal Property Securities Register. The Personal Property Securities Act was passed in 1999 by the Government of New Zealand, coming into full force and effect on May 1, 2002. This website allows people to register their security interests in personal property which protects their property if the debtor fails to pay in full or discontinues business. The Personal Property Securities Registry replaced three separate registers and introduced a more compact and convenient register.
Around 3,000 businesses fail every year in New Zealand, and this means that there are millions in outstanding debt that go unpaid. The creditors of these businesses end up being out-of-pocket because the failed business / business owners have no ability to repay that debt and may even declare bankruptcy and/or dissolve their company. This is a position that no creditor wants to be placed in and it is even worse if you do not have a security registration over that property which is either lost or sold. Any funds realized at an auction of these items will be distributed among those creditors that have a secured interest in the assets.
If your company supplies goods, services and funds to other businesses on payment plans (credit), those interests that you have must be registered quickly so that if that business goes under with unpaid debts you can recoup some of those funds and assets. Your best chance of
gathering funds and/or having goods returned is to register your security interest in the PPSR.
The PPSR offers many benefits to businesses including:
- Payout if the business is sold.
- Ability to repossess goods supplied to a company.
- Tracing of sale proceeds.
- Ability to repossess goods from the client.
- A claim on the debts on the books.
- A claim on any work that is in progress (for payment)
Now you might be wondering just what you can register in the PPSR. There are many ways that one business can extend credit to another business or a customer and it is not just cold hard cash. If your business supplies products to another business on a term loan meaning they have several months to pay. If that company goes out of business before they pay their term loan, you will not be paid back unless you have registered your goods in the PPSR system. If you lease equipment to a company then this is another example of credit and this can also be registered with PPSR.
You may not realise this; however, if a business signed a lease with your company for a minimum of one year you can receive that money or some portion of that unpaid rent if your interest has been registered in the PPSR. By registering your interests in the PPSR you are increasing your chances of being paid back money that you are owed. Conversely, if your interest is not registered, the business liquidator sells off all of the goods (including the ones that you supplied) and the funds realized from the sale will go to businesses that took the time to register their interests.
Some business owners believe that a Retention of Title Clause with a debtor is the answer to protection of their assets, but it is meaningless if the company goes out of business. The only way you can collect anything back is if you have registered an interest in the PPSR. In this way you will gain an advantage of priority over other creditors but without it a ROT clause is meaningless.
Unfortunately, many businesses do not bother to register with the PPSR because they have no idea what it does and what protection it provides to them where their security interests are concerned. If a business owner does not understand what types of products can be registered with PPSR then they may not try to register their creditproduct because they do not understand their role as a secured creditor. It does not need to be a monetary product, credit card, or a loan.
Some business owners believe that registration of their interest or product in the PPSR will be a long and complicated process that they simply do not have time for. They forego the process hoping that they will not run into a snag with the debtor. Even though the PPSR has been around for nearly 20 years, many creditors do not take the time to register their interests with the registry.
Credit Checks on Customers Through PPSR
The PPSR website also offers another great advantage and that is to check to see if a debtor is high risk before you extend credit or goods to them on credit. It is a way to run a credit check on them to ensure they are credit worthy before you take a risk. You can also clearly see any other security interests registered against them before you decide if you will give them credit too.
What are the Steps to Registering your Security Interest?
It is easy to register your security interest in the PPSR. You will need to create a user account on the website and it is simple to do by following the steps on the website. Once an account has been created, you register the Security Party Group, then once that has been established, register your interest through a financing statement. A financing statement needs to include many key details including the details of the secured party (that is you), the details of the collateral, details about the debtor and an expiry date. Once registered, you will enjoy priority over any creditors that are unsecured, and you will be in a solid position if your debtor declares bankruptcy or liquidates the business. Registering your interest with the PPSR website can save you issues in the future with financial details and offers a guarantee that your credit can be collected.
Many business owners do not want to bother with PPSR registrations or checks, but there are companies that offer services where they do the heavy lifting for you. You can have an option where they do some of the work for you or you can do it all yourself through their website. Creditworks offers affordable options for businesses because they know that it is important to keep PPSR registrations up to date. Businesses can avoid set up costs, save money on registrations and avoid hosting fees by using Creditworks’ PPSR and Portal option. With competitive pricing Creditworks can help your company to get the registrations that you need completed done in a timely way without the hassle.
Creditworks also looks at your business’ registrations to see which ones are going to expire and renew them so that you do not lose your registration. They also make any amendments to Financing Statements if they are needed. There are so many benefits that it hardly makes sense to do these on your own.