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.
Key Points
No matter what the reason for the loan, no matter what the circumstances are of the loan, the main emphasis of a Secured Loan Agreement is to provide the same security as the banks when they extend credit (e.g. Car Loan). This is generally done using the PPSA Legislation or Personal Property Securities Act Legislation and its accompanying register, the PPSR or Personal Property Securities Register
The PPSA Security Register is the only way to maintain and prove ownership over Goods or Equipment which is especially important when those Goods or Equipment are being used as collateral for a loan.
In the first instance, and commonly used when an investor wants to secure their investment against the overall assets of a business, an Investor or Business Owner can register a general security interest or ALLPAAP which stands for All Present and After Acquired Property. This type of registered security secures the entire assets of the 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 a specific piece of machinery or equipment. This is more commonly known as a PMSI or Purchase Money Security Interest, and serves to secure the loan against the equipment in case of future financial difficulties and default in payment.A PMSI PPSA Registration is especially imperative if the Investor or Business Owner is looking to keep legal ownership over the piece of equipment being financed. It is the most common (only) type of security used by finance companies when extending credit to a business for a capital equipment purchase.
The loan interest rate applicable to the loan agreement can be set based on the rate agreed by both parties. This can also include options such as an agreed flat fee or even a balloon payment at the end of the term to reduce monthly repayments. It is totally flexible.
The Loan Term is variable based on affordability and the needs of both parties. It can be anywhere from 12 months to 7 years. A two to three year period seems to be pretty standard.
Again, totally dependant on both parties requirements but can range from weekly, fortnightly, monthly or quarterly. It is worth noting that monthly seems to be the most common but it can depend on the convenience of both parties.
Our Automatic Direct Debit Facility ensures the loan payments progress smoothly over the period of the loan and helps eliminate defaults in loan repayments. It has been found that utilising a direct debit facility in conjunction with a loan back-office dashboard proves the most effective.
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 centre piece of your loan management functionality which also includes various other options such as interest and principle breakdown which is ideal for future reporting.
If you like to know more about "How You Can Secure Your Loan Against the Equipment Being Financed" please feel free to request our FREE Facts Sheet here. Until Next Time, Have a Great Day
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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