Secured asset loans for New Zealand businesses.

A business term loan where plant or equipment the business already owns provides the security, rather than property or nothing at all. The lender registers a security interest on the Personal Property Securities Register, advances a lump sum, and is repaid on a fixed schedule. Nothing is being purchased.

A proportion of what the asset would realise on sale, commonly between 40% and 70% depending on how liquid the resale market for that class of asset is. That figure is frequently well below what the business paid and below what the asset is worth to it as a working item, which is the most common source of disappointment in this structure.

Because the lender is funding a business need rather than an acquisition, the asset is used rather than new, and there is no new earning asset arriving to service the debt. All three raise the risk relative to a purchase facility on the same security, and the pricing reflects that.

Generally yes, and lenders will still ask. The answer informs the credit assessment rather than restricting the use, because a business borrowing against its plant to fund a contract already won is a different proposition from one covering a shortfall. Being straightforward about it produces better outcomes than being vague.

Yes, exactly as before. Ownership does not change, possession does not change, and the only practical difference is a registered security interest against the asset and a repayment obligation. That is the feature distinguishing it from a sale and leaseback, where ownership does pass.

To grant clean security, yes. A PPSR search confirms it, and where an earlier facility remains registered despite being repaid, the discharge has to be completed first. Occasionally a lender will refinance an existing facility and take security in the same transaction, which is a different arrangement from lending against a clear asset.

Interest on borrowing used for business purposes is ordinarily deductible, subject to the accountant’s confirmation. Because this structure is a loan rather than an asset purchase, there is no new depreciation claim attached to it; the business continues depreciating an asset it already owned, on the same basis as before.

When maximum capital release is the objective. A sale and leaseback typically frees more than a secured loan against the same asset, because the financier is buying it rather than lending a proportion against it. The trade is that ownership passes and the business becomes a lessee, which is a bigger change than granting security.

The lender can enforce its registered security interest under the Personal Property Securities Act 1999, take possession of the asset and sell it, applying the proceeds to the debt. Where the sale raises less than the balance owing, the shortfall commonly remains payable by the business and by any guarantor.

Commonly within a week or two where the asset is mainstream and ownership is straightforward to establish, and longer where a formal valuation is required. The valuation is usually what sets the pace rather than the credit assessment, which is the reverse of a purchase facility.

Frequently yes, and lenders commonly take security over several assets to reach an advance the business needs. That ties those assets together, so a default reaches all of them rather than one, which is worth understanding at signing rather than discovering later.

Rarely, and for a straightforward reason. Values fall fast enough that a lender has little confidence in what the security would be worth partway through a term, and fit-out installed into premises cannot be recovered economically at all. Mobile plant, vehicles and general workshop equipment are the classes lenders are comfortable with.