The Small Business Restructuring Process (SBR) is a new, streamline form of restructuring that allows the director of a financially distressed company to remain in control, and work collaboratively with an insolvency practitioner to formulate a debt repayment plan and restore commercial viability. However, there are some important questions to ask before implementing a SBR. These include: 

  1. Can the company become profitable? 

The Small Business Restructuring Process is not some magical solution that can restore the commercial viability of any failing company. Instead, the reasons behind the financial hardship must not only be identifiable, but also resolvable. A good example is the COVID-19 pandemic, where many hospitality businesses saw a sharp decline in patronage due to the lockdown orders. Post pandemic, these profits begun to increase, but the accumulated debt had already become too great, leading to financial difficulty.  

  1. Are key stakeholders willing to support the company? 

Key stakeholders such as suppliers, owners, managers, directors, customers and most importantly, creditors must be willing to support a turnaround option. Clear and honest communication is also crucial when communicating with stakeholders.  

  1. Have you formulated a plan to convince creditors that the company is (or will become) commercially viable?  

Creditors are often sceptical of a turnaround effort. They may prefer other processes, such as a liquidation. However, liquidations will often achieve only a small return, particularly if it is a small company with few assets. A restructure is often the more commercially viable option, offering a better dividend return. It can be valuable to consult with a pre-appointment insolvency practitioner to discuss how best to navigate this challenge. 

  1. How will you fund and manage your cashflow?  

Cashflow is the lifeblood of any company. A business must have a plan to track, control and optimise their cash flow. This is a crucial aspect of garnering creditor support.  

  1. Why are you restructuring?  

This is the final, crucial question to ask before implementing a restructure. A passion or love for your company is sometimes not enough. A restructure should only be implemented if the commercial viability of the business can be restored.

Often, it can.  

It is the role of a restructuring practitioner to analyse these issues and determine the company’s commercial prospects. They provide realistic, pragmatic and objective advice.  

If you are interested in learning more about restructuring, please reach out to one of our experts on +61 2 9251 5222.  

There is always light at the end of the tunnel. You do not need to undergo these challenges alone.