As a business owner, at some point you may have come across the concept of Registering a Security Interest.
This often comes up whenever you talk about finance, loans, or even when customers sign your terms and conditions.
What does it mean to Register a Security Interest? Why would you need to do it? And what else do you need to do?
This article will step you through what it all means.
What Does It Mean To Register A Security Interest?
During the course of businesses, there may be a situation in which you obtain a loan or someone purchases something on credit. To ensure payment, you might be asked for “security”.
Security often means holding personal property — such as your personal home, belongings or even your car — as collateral in the event that payment is not made.
In simple terms, this means that, if payment is not made under a contract, the other person has the right to claim their interest on whatever you have listed as the security.
This is generally a strong form of leverage and protection for whoever is lending the money. So where does a Security Interest come in?
In the event that payment is not made on a secured loan, for example, you’ll want to make sure that you have the right to make a claim on the security.
In Australia, you can Register a Security Interest on the Personal Properties Securities Register (the PPSR). The PPSR is essentially a noticeboard that lets you know if someone else already has a claim on a security interest.
This means that, in case other people have a security interest in the same property, you can place a notice on the PPSR to show that you have the right over that property.
When Do I Need To Register A Security Interest?
In some cases, you may need to Register a Security Interest (or someone may need to do it against you!).
This often comes up in the context of finances (for instance, when obtaining loans or offering something on credit).
Whenever you have a secured loan or a credit payment with security, you want to make sure that you have the priority rights to that security if payment is not made. This helps you protect and manage your credit risk as a business.
An Example Of Why You Should Register A Security Interest: Business Loans
A good example of why you should Register a Security Interest is when you’re offering a loan to another business (whether you’re an investor or an independent business).
To help protect you from defaults on that loan, you might request that it be a secured loan. A secured loan involves having personal property held as security if the debtee can’t make repayments. In some cases, businesses might offer their personal home as their security for the loan.
To make sure that you have the right to claim a security interest on that home in the event of a default, you should Register A Security Interest.
This helps you give notice on a public dashboard (the PPSR) to let others know that you have priority rights on that personal property.
Need Help With Registering A Security Interest?
If you need help Registering A Security Interest, or if you want to understand how it all works, we can help!
From Registering your Security Interest on the PPSR to drafting the Terms and Conditions needed for your contract to reflect that interest — a good lawyer can help you manage and protect your credit risk.
You can reach out to our friendly team at firstname.lastname@example.org or at 1800 730 617 for a free chat to explore your options.
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