How to Secure Your Investment
As An Investor or Director
Loan Agreements Secured Against the Assets Being Financed (2024)
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
- Securing Your Loan
- Types of Security
- Loan Variables
- Loan Management
Securing Your Loan
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.
Types of Security
ALL Present and After Acquired Property (ALLAAP)
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.
Purchase Money Security Interest (PMSI)
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.
Loan Variables
Once a Secured or Investment Loan has been agreed to in principle there are a number of variables that need to be taken into account.
Set Your own Interest Rate
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.
Loan Term
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.
Repayment Frequency
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.
Loan Payments
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.
Loan Management
Loan Management
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.
