Many Australian companies face challenging debt situations, particularly in the wake of recent economic disruptions. If your business is fundamentally sound but struggling with historical debt, Small Business Restructuring (SBR) might offer the solution you need.
This relatively new restructuring option helps companies reduce their debts while continuing to trade. Understanding how it could help your situation marks the first step toward positive change.
The core benefits of Small Business Restructuring
When considering SBR, many directors focus initially on debt reduction. While this represents a crucial benefit, the advantages extend far beyond simply reducing what you owe. SBR offers a comprehensive approach to business recovery and improvement.
Significant debt reduction
One of the most immediate and tangible benefits comes through debt reduction. Companies using SBR typically achieve:
Typically reduces total debts by around 70%
Includes ATO debts and other unsecured creditors
Creates a manageable payment plan for the remainder
Stops interest charges on frozen debts
Keep trading while restructuring
Unlike traditional insolvency processes, SBR allows you to maintain control of your business throughout the process. This unique feature helps preserve business value while addressing historical debt challenges. During restructuring you can:
Stay in control of your business
Continue serving your customers
Maintain supplier relationships
Keep your employees working
Preserve your business's value and goodwill
Legal protection
The moment you begin SBR, powerful legal protections take effect. These protections create breathing space to implement your restructuring plan without creditor pressure:
Stop creditor actions against your company
Prevent personal guarantee calls
Protection from wind-up applications
Breathing space to implement changes
How SBR works in practice
Understanding the practical aspects of SBR helps you evaluate whether it suits your situation. The process follows a structured approach designed to balance your need for debt relief with creditor interests.
Small Business Restructuring follows a straightforward process that typically includes:
Initial assessment of eligibility
Appointment of a restructuring practitioner
Development of your restructuring plan
Creditor consideration and voting
Implementation of the agreed plan
Throughout this process, you maintain control of your business operations while the practitioner helps you navigate the restructuring.
Real results: A client's journey
Sometimes real examples help illustrate what's possible through SBR. Consider Sarah's experience with her café, which accumulated $400,000 in ATO debt during COVID-19. Through SBR, she achieved remarkable transformation:
Reduced the debt to $120,000
Kept her business trading
Retained all staff
Paid the remaining debt over 12 months
Now runs a profitable enterprise
Key eligibility requirements
Before proceeding with SBR, understanding the eligibility criteria proves crucial. These requirements help ensure the process suits your situation and offers the best chance of success.
To access these benefits, your company must meet several key criteria:
Have less than $1 million in total liabilities
Be substantially up to date with employee entitlements
Not have done an SBR in the past 7 years
Have your tax lodgements substantially up to date
Why choose SBR over other options?
When facing debt challenges, directors often consider several potential solutions. Understanding how SBR compares to alternatives helps inform your decision-making process.
Compared to ATO payment plans
While ATO payment arrangements offer one solution, SBR often provides better outcomes:
Achieves actual debt reduction, not just time to pay
Includes all unsecured creditors, not just the ATO
Provides legal protection during the process
Creates a sustainable path forward
Compared to informal arrangements
Informal deals with creditors might seem simpler, but SBR offers significant advantages:
Legally binding on all creditors
Better protection for directors
More certainty of outcome
Professional support throughout
Compared to traditional voluntary administration
Traditional insolvency processes often prove more disruptive and costly:
More cost-effective
Less disruptive to trading
You stay in control
Better outcomes for all stakeholders
The long-term advantages
Beyond immediate debt relief, SBR often creates lasting positive change for businesses. These enduring benefits help create stronger, more sustainable operations.
Financial stability
The debt reduction through SBR helps create solid financial foundations:
Reduced debt burden
Manageable repayment structure
Improved cash flow
Better financial controls
Business strength
Many companies emerge from SBR stronger than before:
Stronger balance sheet
Enhanced supplier relationships
Improved operational efficiency
Platform for sustainable growth
Personal benefits
Directors often experience significant personal benefits:
Reduced stress
Better work-life balance
Clear path forward
Protected personal assets
Making SBR work for you
Success in SBR requires proper preparation and engagement. Understanding how to maximise the benefits helps ensure optimal outcomes from the process.
To maximise the benefits of Small Business Restructuring:
Act early: Taking prompt action when challenges arise often leads to better outcomes:
Don't wait until crisis point
More options available earlier
Better outcomes possible
Maintain more control
Be prepared: Good preparation helps smooth the restructuring process:
Get your records in order
Update your business plan
Understand your numbers
Identify improvement opportunities
Engage openly: Active participation in the process supports better outcomes:
Work closely with your practitioner
Communicate clearly with stakeholders
Be transparent with creditors
Keep employees informed
Next steps to transform your business
If you're considering Small Business Restructuring, taking that first step often proves the hardest part. Planning your approach helps ensure you start the process effectively.
Here's how to get started:
Book a free consultation to assess your eligibility
Gather your basic financial information
Discuss your situation with our experts
Understand your options clearly
Make an informed decision about moving forward
Contact our team for a confidential discussion about how Small Business Restructuring could benefit your company. The sooner you act, the more options you'll have to create positive change.
Remember: SBR was specifically designed to help viable businesses overcome debt challenges while continuing to trade. Let's explore whether it's the right solution for your situation.
Read next: Small Business Restructuring eligibility: A simple way to check if you qualify
Previous: Small Business Restructuring vs liquidation: Which path is right for your company?
Or back to: Small Business Restructuring (SBR) Guide for Company Directors
