When a customer goes into receivership or administration, or even just has another larger creditor pursuing them for money owed. SME's like yourself can often find themselves at the end of a long queue waiting to be paid.
Up until 2009, there was little that SMEs could do to protect their interests, that all changed with the introduction of the Commonwealth Government’s Personal Property Securities Register (PPSR). With the PPSR, SMEs can register their interest in their stock, or money owed, or even equipment on lease, to prevent other creditors from taking control and selling the goods.
What is a creditor and what does it mean to be secured?
A creditor is a person or company to whom money is owing. In the finance world, creditors fall into one of two categories, secured and unsecured. A secured creditor is someone like the banks and loan providers; when you get finance from a bank or loan provider they are a secured creditor to you and you are the debtor.
Secured creditors, who are usually better resourced, are usually at the front of the queue and take the first, and often the biggest slice of the pie, often leaving just crumbs on the table, or nothing at all, for the smaller unsecured creditors at the back of the queue.
Even worse, administrators and secured creditors often take possession of unpaid stock that smaller businesses have provided and sell that to recover their losses. If you are not utilising the PPSR then you are not a secured creditor. There are a few boxes to tick before you can start using the PPSR, you need to have some form of agreement in place between yourself and your customer. It is really important to cross your Ts and dot your is, otherwise, a registration may be void and would not protect your assets.
The PPSA is a government initiative created to even the playing field for businesses in comparison to financial institutions throughout Australia. Financial institutions have always had the privilege of being secured creditors in the event that a company, business or individual is unable to meet its financial commitments.