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What Is A General Security Agreement?

One security document that almost all lenders require a business to sign prior to a loan being provided is a general security agreement. 

This is because a lender is looking for a guarantee that your business will be able to pay back the principal amount and the interest in full.  To provide this, lenders will usually require:

  • thorough investigations of your business and its cash flow;
  • you to make specific representations that must remain true during the term of the loan;
  • your business to provide undertakings that it must perform; and 
  • you and your business to sign security documents that grant the lender rights over your assets.

A general security agreement or GSA is a security document that gives a lender rights over all your business’s present and future assets (including tangible and intangible property). This does not however include assets such as land or statutory licenses. If your business defaults on the loan, the lender will be entitled to take enforcement action against you, including 

  • Appointing a receiver over your business and
  • Selling the secured assets

Before signing a GSA, you should consider the following:

  • Is The GSA Required? 

It is essential to question why the lender requires the additional security and, if possible, negotiate with the lender to remove the requirement to provide a GSA. It is in your interest to limit the security you provide to the lender to secure the loan, as otherwise, the security may not be proportionate to the loan amount

  • Are The Terms Of The GSA In Line With The Industry Standard?

A GSA is a standard security document required by lenders, so the terms of a GSA should follow standardised expectations across the financial sector. Consult with your lawyer to ensure that the terms are within expectations, or to negotiate for the GSA to be drafted to be in line with the industry standard. 

  • What Are Your Other Obligations Under A GSA?

Your legal obligations under a GSA will generally include:

  • effecting and maintaining adequate insurance policies over the business assets with a reputable insurer;
  • providing the secured party sufficient information about the business assets to allow it to protect its interest over the assets; and
  • not dealing with business assets without the secured party’s consent unless it is in the ordinary course of your business. 
  • What Are The Restrictions On Dealing With Your Business Assets

A standard GSA places significant restrictions on your ability to deal with your business assets, without the lender’s consent. Under a GSA, there may be restrictions on the business’s ability to:

  • sell or transfer the business assets. If any assets are sold, the proceeds may need to be applied to the debt unless the secured party agrees otherwise; 
  • permit others to have an interest over the assets;
  • transfer the control of the assets to others, and
  • alter the nature of the assets.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier

David and Alison Parker

I have been consulting J L Noller and Co. (more specifically Jane) for six years and during this time I have found her to be professional, efficient and easy to discuss all accounting and taxation matters with. Her office team are all polite and friendly also.

David and Alison Parker

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Carl Gillmore

I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

Carl Gillmore

Carl Gillmore Landscape

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier