Your supplier wants to register on the PPSR: what it means for the rest of your funding

It usually turns up at a good moment. You’ve asked a supplier for a bigger limit ahead of summer, they’ve said yes, and attached to the new credit application is a set of terms of trade with a clause about “retention of title” and a line saying they’ll register a financing statement on the PPSR. Sign here, please.

Most owners sign without a second look. Most of the time that’s fine. But that signature adds a new track to your funding mix, and it plays against the others — your bank, any equipment finance, an invoice funder, a future lender. Two minutes of checking now saves a stalled loan later.

What is a retention of title clause, in plain English?

A retention of title clause (sometimes called a Romalpa clause) says the goods a supplier sends you stay the supplier’s property until you’ve paid for them. You can use them and sell them in the normal course of business, but if you don’t pay, or the business fails, the supplier can come and take back whatever of its stock is still sitting on your shelves.

In New Zealand, that clause is treated as a security interest under the personal property securities rules. And security interests over things like stock, equipment and vehicles live on one public database: the Personal Property Securities Register (PPSR), run by the Companies Office.

Why does the supplier need to register it?

Because the clause on its own is weak. The Companies Office’s guidance for suppliers says registering on the PPSR “can provide protection” for the supplier’s claim to repossess goods if the customer doesn’t pay. It also spells out what happens if they don’t register: they lose the special priority over earlier registered interests, and if a bank later appoints a receiver, the supplier “won’t be able to recover the goods”.

So a supplier asking to register isn’t a sign they think you’re about to go under. It’s a sign their credit team knows the rules. If anything, a supplier willing to extend a big limit with proper registration is more likely to keep extending it.

The Companies Office’s own case examples include a boat builder that took a deposit, delivered on 60-day terms, registered its interest before finishing the build, and was able to repossess when the buyer didn’t pay the balance. Swap the boat for pallets of stock and that’s the logic your supplier is following.

Can a supplier really rank ahead of my bank?

Over its own goods, yes. This is the bit that surprises owners who assume “the bank always comes first”.

Normally on the PPSR, the first to register ranks first. But a supplier that sells on retention of title terms can qualify for purchase money security interest (PMSI) status. The Companies Office says PMSI status gives priority over other non-PMSI interests in that property — “such as that of the contractor’s bank, even if the bank registered” first. The catch for the supplier is timing: its guidance says the supplier must register within 10 working days of giving possession to the customer.

What that means for your mix:

• Your bank’s general security agreement (GSA) might cover “all present and after-acquired property”, but the supplier can still sit in front of it for the supplier’s own unpaid goods.
• That doesn’t hurt the bank’s position on everything else — your equipment, vehicles or debtors not linked to that supplier.
• Any lender valuing your stock will knock down the value of stock that’s covered by supplier claims, because someone else gets first go at it.

None of this is a reason to refuse. It’s just a fader you need to know is up.

What should you check before you sign?

Here’s the short soundcheck. Read the terms of trade and, if the supplier sends one, the PPSR confirmation they’ll register.

Check	Fine	Push back
What the registration covers	Goods supplied by that supplier	“All present and after-acquired property” or every asset you own
Proceeds	Proceeds of selling their goods	Proceeds of everything, or all your debtors
Personal guarantee	None, or capped and clear	Unlimited guarantee buried in the same form
Expiry	Matches how long you’ll trade	No discharge promise once the account is closed
Mixed goods	Clear on goods you’ve processed or combined	Claims over your finished product as a whole

The first row matters most. A trade supplier with a specific registration over its own goods is a normal part of a healthy stack. A trade supplier with a registration that reads like a bank’s GSA is a problem waiting to happen — every new funder will see it on a PPSR search and ask why your timber merchant appears to hold security over your whole business.

You can usually ask for the description to be narrowed. Plenty of suppliers use a wide template because it’s what their lawyer wrote years ago, not because they genuinely want your forklift. Ask politely, in writing, and keep the reply.

If the form also asks for a personal guarantee, treat that as a separate decision with its own weight. It’s not the same thing as retention of title, and it doesn’t have to come as a package.

Want a second pair of ears on how a new trade account fits with your borrowing? Tell us what you’re lining up — no credit check to start, and one real person reads it.

How does a supplier registration play with your other funding?

Think of each funder as a track on the desk. Supplier registrations mostly sit politely in the background, but they can clash in three places.

Your main lender. Many business loans and overdrafts come with a GSA and a covenant about granting other security. Read yours. Some lenders expect to be told about new security interests, even routine trade ones. A quick heads-up email costs nothing and saves an awkward conversation at review time.

An invoice funder. If a supplier’s clause reaches the proceeds of selling its goods, and those proceeds include the invoices you’ve issued to your customers, there’s a potential overlap with an invoice funding facility that wants first claim over your debtors. Funders handle this regularly, often with a waiver or priority letter from the supplier, but it takes time. Sort it before you sign the invoice facility, not after.

A lender looking at stock. If you’re raising money against stock, or a lender is counting stock as part of its comfort, expect it to discount anything covered by supplier claims. That’s why stock-heavy businesses often get more from ordering their funding sources carefully — supplier terms first, then any lending sized to the gap — than from leaning on stock as security.

For a wider look at who ranks where across equipment finance, invoice funding and property, see who ranks first when you mix funding.

Illustrative mix: a Hamilton plumbing business stocks up for summer

Illustrative only; this describes no real business.

A Hamilton plumbing and drainage business wants to carry far more stock into the summer building rush. Its plan is to use the supplier trade credit piece harder before borrowing anything.

1. The supplier track. Its main supplier agrees to a much higher limit and longer terms on the summer order, in return for signing updated terms of trade and a PPSR registration. The owner reads the form and finds the collateral description says “all present and after-acquired personal property”. They ask for it to be limited to goods supplied by that supplier and the proceeds of those goods. The supplier’s credit manager agrees by email.
2. The bank track. The owner emails the business banker to say a new supplier registration is coming, limited to that supplier’s goods. The bank, which holds a GSA, has no issue.
3. The gap. The bigger limit covers most of the stock build. What’s left — mainly wages for an extra apprentice and van costs before summer invoices are paid — is too lumpy for supplier terms. The owner sizes a modest unsecured facility to that gap, using the funding remixer to set the faders first.
4. The paperwork. Because the supplier registration is narrow and disclosed, the lender’s PPSR search raises no questions. The owner adds every registration to a one-page funding plan so the next funder sees the full picture at a glance.

The supplier did the heavy lifting; the loan was the last fader, not the first.

What if there are old registrations against your business?

Search the PPSR by your company name or NZBN before you apply for anything new. It’s common to find registrations from suppliers you stopped using years ago, or from finance companies whose loans were paid off long ago.

Start by asking the secured party, in writing, to discharge the registration. Most will. If they don’t, the Companies Office explains you can lodge a change demand where, for example, the obligations have been performed or there’s no security agreement between you. The process:

• give the secured party written notice first;
• if they haven’t responded after 15 working days, lodge the change demand on the PPSR (you’ll need a PPSR user account, and there’s no fee);
• the secured party then has 15 working days to accept it or get a court order — otherwise it’s automatically accepted and the registration discharged or amended.

One seasonal catch: the Companies Office says the period from 25 December to 15 January doesn’t count as working days. If you’re planning a funding application for early in the new year, start the clean-up in November.

When does a loan belong in this mix?

A bigger supplier limit is often cheaper and simpler than borrowing, so push it as far as it sensibly goes. A loan earns its spot when:

• the supplier won’t stretch any further and there’s still a gap — see how to fund stock without leaning only on a loan;
• you want to clear a supplier balance to keep the account in good standing over a slow patch;
• the costs around the stock — staff, freight, rent, GST — can’t go on a trade account; or
• you’re consolidating several tight trade accounts so each supplier gets paid on time.

In every case, size it to what’s left after the supplier piece, and tell the lender about the supplier registrations from the start.

Ready to fill the gap your supplier terms leave?

Getting a bigger trade account is a genuine win — it means a supplier trusts your business enough to carry part of the load. Registration is just the paperwork that comes with that trust. Once you know what it covers and your lender knows it’s there, it sits neatly in the mix.

If there’s still a gap after your supplier has done its part, we can help with the next piece. Telling us about it takes about 60 seconds, and there’s no credit check when you first enquire. Your details aren’t sprayed across a pile of lenders, so your phone won’t light up with strangers. A real person looks at your stock, your supplier arrangements and your trading, then calls you to talk through what fits.

Please fill the form in accurately — what you need, what the supplier is already covering, your turnover and any existing lenders or IRD balances — so the first route we suggest is the right one.

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