Written by Paul Tweedie on 11 March 2022.
Secured Loan Agreements are exactly that, Loan Agreements that are secured against either the assets of a business or directly to the item being financed. These loans are particularly useful for Investors making an investment into a business to increase cashflow or for the purchase of additional capital equipment, or additionally used by a business owner injecting finances into their own business for similar purposes.
The unique aspect of using a Secured Loan Agreement is that the loans are fully secured providing the Investor or Business Owner with the same protection as the banks should there be a future financial issue.
Today we are going to discuss one of our Loan Agreements, in particular, our Secured Loan Agreement. Now a Secured Loan Agreement is ideal for an investor making an investment into a business to increase cashflow, for the purchase of additional capital equipment, or additionally when being used by a business owner injecting finances into their own business for similar purposes. No matter what the case, no matter what the circumstances of the loan, the main emphasis of a Secured Loan Agreement is to provide the same security as the banks when they extend credit for a car loan. This is generally done using the PPSA or Personal Property Securities Act Legislation and its accompanying register, the PPSR or Personal Property Securities Register.
Now we do have other videos on the PPSA or Personal Property Securities Act which shows exactly how the PPSR or Personal Property Securities Register works, but essentially when you use a Secured Loan Agreement to extend credit to a business, you can secure that credit on the PPSR or Personal Property Securities Register giving you the same protection as the banks.
This security interest can take two forms. First, an Investor or Business Owner can register a general security interest or ALLPAAP which stands for All Present and After Acquired Property, over the entire business being financed, locking in the total assets of the business as the loan security. Or alternatively, an Investor or Business Owner can link their security to a specific piece of equipment or machinery. This ensures that a potential Investor or Business Owner can maintain ownership of specific machinery or equipment more commonly known as a PMSI or Personal Money Security Interest, in case of future financial difficulties and default in payment.
When it comes to establishing the Secured Loan Agreement on the Investor or Business Owners behalf, the process is reasonably straightforward, but as with any Loan Agreement, there are several variables. The first would be the entities involved in the Secured Loan Agreement. Quite often these entities will be dependent on the particulars of the specific loan requirements and can vary but traditional range from Individuals to businesses, companies or Trusts. The details of which are important when it comes to the Loan Establishment process. The second variable would of course be the interest rate, this includes if a potential Investor or Business Owner is going to charge an interest rate and what that interest rate might be. An Investor or Business Owner might elect not to charge any interest rate or alternatively decide instead to charge a flat fee. It is totally up to the Investor or Business Owner who is extending the credit.
Another variable would be the costs. An Investor or Business Owner may decide to include the Secured Loan Agreement establishment costs into the loan itself, that way minimising any upfront costs to the borrower, and instead, spreading the establishment costs out over the period of the loan agreement.
An Investor or Business Owner might also decide to include a balloon payment at the end of the loan period thereby reducing the monthly loan payments. It is totally up to the parties involved to decide on how they want the loan established.
Direct Debits or direct debiting the loan repayments from the borrower’s bank account is a great way of trying to ensure the loan payments progress smoothly over the period of the loan and helps eliminate defaults in loan repayments which can be debited on a weekly, fortnightly, or monthly basis.
The use of electronic signatures when setting up the loan agreement means that all parties can sign the loan documentation easily on any smartphone or tablet which helps dramatically with the initial setup of the loan documentation.
Once an Investor or Business Owner has finalised the Loan particulars, the main benefit in choosing a Secured Loan Agreement through CCA or Collection Consultancy Australia, excluding the fact that the Investor or Business Owner has the flexibility of having any loan repayments direct debited from the borrower's account, or the fact that an Investor or Business Owner can if required, register a Security Interest through the PPSR OR Personal Property Securities Register over the loan, resulting in exactly the same protection as the banks, CCA or Collection Consultancy Australia also supply the Investor or Business Owner with a Secured Loan Agreement Management Dashboard.
Our Secured Loan Agreement Management Dashboard provides the Investor or Business Owner direct access to their Secured Loan Agreement, which you can log into at any time, available 24/7. This is where an Investor or Business Owner can view all loan repayments, including which payments have been made and which are still outstanding. The Investor or Business Owner will even receive automated notifications of any defaults in loan repayments by the borrower. Our Secured Loan Agreement Management Dashboard is the centrepiece of your loan management functionality with various other options available.
The Secured Loan Agreement Management Dashboard is where the Investor or Business Owner can adjust the Loan, including the loan amount, the loan period, and even top up the loan if required. An Investor or Business Owner can simply renegotiate the loan with the borrower. They might decide to extend the loan period which can be done through the Secured Loan Agreement Management Dashboard, in which case a new loan agreement would just automatically start. An Investor or Business Owner can even defer payments by adding an additional payment to the end of the loan term or alternatively forgive or cancel the loan. It is totally up to the parties involved.
So having a Secured Loan Agreement Management Dashboard provides complete flexibility not available anywhere else.
If you would like to know more about "Investor & Director Loan Agreements" please feel free to request our FREE Facts Sheet here.
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With over 35 years’ experience Collection Consultancy Australia prides itself in offering Products and Services designed to Protect Business Assets and Cashflow. Quite often the process can start from simply making business owners aware that there is option available, through to business specific solutions and education. We are here to let business owners know that there can be a better way to secure their financial future.
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