The Australian Small Business and Family Enterprise Ombudsman Kate Carnell is urging small businesses to secure the assets on the Personal Property Securities Register (PPSR) to help protect them should the business become insolvent.
Carnell’s call comes as the federal government’s JobKeeper wage support scheme is due to wind up on March 28 with many concerned about what this will mean for business and the broader economy.
Any hope of an extension was snuffed out by Treasurer Josh Frydenberg in early February, when he categorically ruled it out telling the ABC it was always a “temporary program” and that more than $80 billion had already been spent supporting 3.5 million Australians.
Carnell is concerned this will prompt a wave of insolvencies and is urging small business to be prepared for the road ahead.
She says many small business owners have taken out loans to help them through the COVID-19 pandemic and says these loans should be secured on 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,” Carnell said.
“The greatest pity is that many small businesses find it too difficult to use.”
Carnell says while many small operators have invested heavily in their businesses during COVID, few know they can secure these loans so they can be more secure.
Carnell has released a PPSR Research Paper which calls for an urgent overhaul of the PPSR system to make it more accessible.
“The name is confusing, the language is overly technical, and the operation of the register is very complicated,” she said.
“Many small businesses we spoke to said they would need a lawyer to help them register their interests – an additional cost burden for struggling 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 report asks small business cloud accounting platforms to look at implementing a pop-up reminder to small business owners who record a personal loan to the balance sheet to remind them to register the loan on the PPSR.
Carnell has also called on the federal government o look at offering revenue-contingent loans for businesses.
This scheme would operate in a similar way to how HECS works for university students in that the loan would not need to be paid back until business turnover hit a designated level.
“Even in the best of times, small businesses have struggled to secure finance. Taking into account the enormous challenges they are now facing, the fallout of insufficient working capital could be devastating,” she said.
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