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Does ‘cash is king’ still apply to SME funding?

The old adage ‘Cash is King’ is in many respects correct for both businesses and business owners today. Certainly, those who were able to navigate the tumultuous conditions over the last few years and hold onto cash have no doubt benefited from doing so.

We have now progressed to a ‘post-COVID’ world. While society has begun to grasp the nuances of this unforeseen world, the economy is still finding its new normal post COVID.

Cash is King, and those who have it need to use it wisely.

How can the Personal Property and Securities Act (PPSA) provide security when funding your business?

Some business owners who have held onto cash and other assets will undoubtedly be called on to provide funding to their business.

Most consider funding in response to a shortage of cash in the business, which is often urgent. However, funding one’s business personally can be to the detriment of a director’s personal position. And, contingency planning is required to protect both the director’s personal finances and the business’s.


The PPSA has been around for over a decade. However, it’s underutilised as a tool to provide security over cash and other assets.

Most business owners, especially SMEs, do not sufficiently differentiate between their personal financial position and their business’s.

The PPSA, and appropriate documentation put in place between a business owner and their business can provide a business owner with much greater certainty, security, and control in a worst-case scenario. However, this needs to occur proactively and as early as possible. It cannot be done in retrospect, after a problem has arisen. If the PPSA is used correctly, it provides a business owner with a higher standing over other creditors to be paid if the company is ultimately placed into liquidation or voluntary administration.

How can the PPSA protect your business from non-payment from debtors?

There is often some uncertainty when supplying goods on credit even after all the relevant credit and risk checks have been undertaken.

If you wish to protect the goods you supply under a retention of title clause in the event of a non-payment from a debtor placed into liquidation or voluntary administration, you must take security over the goods supplied, in accordance with the PPSA.

A Purchase Money Security Interest (‘PMSI’) is a type of security interest under the PPSA that provides priority over all other creditors for the goods supplied if the debtor company is placed into liquidation or voluntary administration.

Overall, a PMSI is a powerful tool to ensure certainty when supplying goods on credit. Failing to properly secure the goods supplied under the PPSA or within the appropriate timeframes can result in your business ranking as an unsecured creditor and you’ll risk not receiving any payment for the goods supplied.

Source: Chris Bergin, WilliamBuck


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