Small Business Restructuring Process (SBRP) offers a vital lifeline for builders and construction businesses facing financial strain from growing debt. Introduced by the federal government in January 2021, this simplified debt-reduction process lets you negotiate with creditors without entering full administration.
This guide explains what SBRP is, its benefits, eligibility criteria, and how to effectively implement it.
What is Small Business Restructuring?
Small Business Restructuring is a simplified, cost-effective way for small businesses to negotiate reduced debt repayments with creditors, enabling builders to regain financial control and continue operations.
Why should you consider SBRP?
Implementing an SBRP offers several practical benefits:
- Maintain Control: Directors remain in charge throughout the restructuring.
- Affordable Alternative: Cheaper and less disruptive than formal administration.
- QBCC Compliance: Not considered an insolvency event under QBCC regulations – critical for Queensland builders.
Are you eligible?
Your building business qualifies for SBRP if you:
- Have total debts under $1 million.
- Have fully paid all employee entitlements.
- Are up to date with Super payments.
- Are current with all ATO lodgements.
What are the limitations?
It’s important to be aware of the following constraints:
- Secured Creditors: Excluded from negotiations; these debts must be handled separately.
- Supplier and Subby Relationships: Trade creditors may be impacted. It is important that you are not compromising your ability to purchase from suppliers or burning relationships with Sub-contractors
- Credit Rating: Restructuring can negatively affect your business’s credit rating for the period that you are in the SBR, and until you have settled the re-negotiated debt.
How to set up Small Business Restructuring?
Here’s how you can set up and manage an effective SBRP:
Preparation
- Discuss with your Accountant: Confirm you meet all required criteria with your accountant and to begin isolating the nature of your outstanding debt.
- Determine Creditor Offer: Decide the realistic amount and payment timeline.
- Communication Plan: Establish clear messaging for employees, suppliers, and creditors.
During the SBRP
- Appointment of Practitioner: Engage a registered Restructuring Practitioner to manage the process.
- Creditor Negotiations: Practitioner formally presents your debt-reduction offer to creditors.
- Agreement: Deal passes if accepted by creditors representing over 50% of total debts.
Post-Restructuring
- Resume Operations: Return to normal business operations.
- Maintain Commitments: Adhere to agreed payment plans for the re-negotiated debt amount.
- Continuous Improvement: Consider ongoing financial advice to maintain business health and avoid future issues.
Need help with your Small Business Restructuring?
Restructuring can be complex, and it’s crucial to handle it correctly to maximise your chance of success. Our experienced team can guide you through the process step-by-step.
Get in touch for a free consultation to learn how we can help your building business navigate the Small Business Restructuring Process effectively.
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