Many small business owners facing mounting debts think their only option is liquidation, when in fact a small business restructure might mean they can turnaround the business and continue trading.
Small Business Restructuring is a process whereby the directors and management of a company can stay in control whilst being supervised by a restructuring practitioner. As part of the process, the restructuring practitioner assists the business to create a plan with their creditors to compromise historical debts, so as to better the chances of the business to survive in the future. A number of other measures may also be taken by the directors of the business to adjust how the business operates to make it more viable.
Below, we’ll have a look at what Small Business Restructuring involves, how it came about, who is eligible, and how Business Rescue Solutions can act as your restructure practitioner to navigate you through the financial minefield.
If you have an eligible small business in financial distress, a Small Business Restructure (SBR) offers an option for you to renegotiate your historical business debts with creditors, when those debts are restricting your ability to effectively trade.
As part of the SBR, a compromise is made between the creditors and your company, which involves you agreeing to pay back your debt to the creditor, in part or in full, over a defined period. If you and the creditor agree that you only need to pay your debt in part, the remaining debt is written off.
Separate to the SBR, your company may decide upon a number of other adjustments to your business to improve how it operates. Alterations include changes to your organisational structure, the sale of assets, and other cost reductions.
If your company is in financial distress, a Small Business Restructure through Business Rescue Solutions offers you the following:
To commence with a Small Business Restructure through Business Rescue Solutions, we have a 30 second test that helps clarify how your business is currently positioned, and how we can best help. (You can also call us directly to discuss.)
As experienced SBR Practitioners, we know the complexity involved with the SBR process, and don’t expect our clients to understand all the ins and outs. As we proceed through the SBR, communication lines stay open and we answer any questions you have about how the process will work.
Here is a basic idea of the SBR flow:
Small Business Restructuring (SBR) commenced in January 2021, when it became apparent many small businesses were suffering due to a range of challenges including travel bans, restricted trading, halts in supply chains, labour shortages, and more, due to the COVID-19 pandemic. Small businesses in the hospitality, tourism and arts industries were particularly negatively impacted, however the pandemic affected many industries in unexpected ways.
In an effort to help small businesses survive the economic impacts of COVID-19, the Federal Government introduced reforms to Australia’s Insolvency Framework. The measures aimed to reposition Australia’s insolvency system to minimise the impacts of handling an insolvency, reduce the time small businesses spend on the insolvency process, and assist more small businesses to survive the COVID-19 recovery period.
Whilst this scheme was initiated as a lifeline for businesses impacted by COVID-19, small business restructuring can apply to any eligible small business facing financial distress.
If you are considering small business restructuring, your company must fit the following eligibility on the day on which the restructuring practitioner is appointed:
We then check that, at the time the restructuring plan is proposed to creditors, that your company will have substantially complied with requirements relating to employee entitlement and tax filing obligations. A restructuring plan can’t be proposed until a small business has:
For full details on eligibility, see the ASIC website.
Here are some signs that would indicate that Small Business Restructuring (SBR) might be appropriate for your business:
Commonly the most prominent warning sign is a large unpaid tax debt. Other signs can include ongoing losses, cash flow problems, overdue tax lodgements and difficulty gaining access to new credit.
A Small Business Restructure provides companies in financial distress with some breathing space to develop a plan that will provide for the continuation of their business and a better return for their creditors (compared to a hypothetical liquidation scenario).
In an SBR, a Restructure Practitioner assists the company to negotiate a plan with creditors to pay their historical debts. The benefits of an SBR are, in brief:
“The SBR process is designed to allow financially distressed, but commercially viable businesses, the opportunity to restructure their debts whilst continuing to trade. … To date, the ATO has supported most restructuring plans, voting in favour of 91% of them. Each plan is assessed on its merits and our voting history shows our commitment to supporting businesses through restructuring.”
Read about how small business restructuring through Business Rescue Solutions has helped the following businesses:
An SBR for this Construction business resulted in an 80% debt reduction
Contact your local branch of Business Rescue Solutions for more information about SBR.