Small businesses have been urged to guarantee assets and business loans ahead of an expected increase in insolvencies this year.
Australia’s Small Business and Family Business Ombudsman (ASBFEO), Kate Carnell, said small businesses must secure their assets through the government’s Securities Registry (PPSR) in the event of insolvency.
Operating under the authority of the Australian Financial Security Authority, the PPSR is the official government registry for collateral in personal property or loans secured by personal property. The agency functions as an online bulletin board where properties such as cars, company assets, boats, used goods and intellectual property can be secured.
“With the past 12 incredibly difficult months we have had and forecasts of a wave of insolvencies to come, PPSR has never been more important,” said Carnell.
“The biggest pity is that many small businesses find it too difficult to use.”
Citing a recent research paper on PPSR, Carnell said the registry “is a powerful tool that can provide significant benefits” to small businesses if used correctly.
“Many small businesses don’t know that registering their interests properly can save them a world of long-term suffering,” she said.
“So many small businesses have invested heavily in their business over the past 12 months, but few know they can secure these loans, pushing them further up the chain of security in the event of an insolvency.
“Most importantly, small businesses registering their interests won’t need to fight tooth and nail to retain ownership of their products if a commercial customer is found. “
The research paper also called for the PPSR system to also be revised to make it more accessible to small businesses.
“Unfortunately, the PPSR in its current form does not make life easier for small businesses,” added Carnell. “The name is confusing, the language is too technical and the operation of the registry is very complicated.
Carnell said small businesses had to hire a lawyer to help them register their interests, which came at an additional cost for those struggling.
“Our report recommends streamlining the system, including encouraging small business cloud accounting platforms to provide regtech solutions such as pop-up reminders to small business owners who record a personal loan on balance sheet, alerting them to record it on the PPSR, ”she said. noted.
“I urge the government to implement the recommendations of our report, to build a system that works for the small business community and gives them the certainty they need. “