The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell is urging small business owners to secure their assets and business loans, after economists predict a sharp rise in insolvencies for 2021.

To ensure they are better protected in the event of insolvency, small businesses are encouraged to secure their assets through the Personal Property Securities Register (PPSR).

“Given the incredibly tough past 12 months we’ve had and predictions of a wave of insolvencies to come, PPSR has never been more important,” Ms Carnell said in a statement.

According to Ms Carnell, the PPSR system, if used correctly, is a powerful tool that can deliver significant benefits to small businesses.

“So many small businesses have invested heavily in their businesses over the past 12 months, but few know that they can secure these loans, pushing them higher up the security chain if there’s an insolvency,” Ms Carnell continued. “More importantly, small businesses that register their interests won’t need to fight tooth and nail to retain title to their goods if a business customer winds up.”

However, many small business owners find the PPSR system difficult to use, with many stating they would require the assistance of a lawyer when registering their interests, an additional and unnecessary cost burden for struggling small businesses.

“Unfortunately, the PPSR in its current form is not making life easier for small businesses,” Ms Carnell stated.

“The name is confusing, the language is overly technical, and the operation of the register is very complicated.”

The PPSR Research paper released by the ASBFEO found an urgent overhaul of the PPSR system is required to make it accessible to small businesses.

“Put simply, systems and regulations imposed on small businesses by government need to be easy to get right and hard to get wrong. At the moment, PPSR is hard to get right and easy to get wrong.”

The ASBFEO’s report recommends streamlining the system, including “encouraging small business cloud accounting platforms in to provide regtech solutions such as pop-up reminders to small business owners who record a personal loan to the balance sheet, alerting them to register it on the PPSR.”

Ms Carnell urges the government to implement the recommendations stated it the research report, to create a service that is usable for the small business community and provides them with certainty.

Source: ASBFEO | Small businesses urged to register assets before insolvency explosion

02 February 2021