Key Takeaways
- Small Business Restructuring (SBR) helps Australian companies manage debts under $1 million while directors retain control of their businesses.
- SBR finance provides essential working capital to keep businesses trading during the SBR process.
- Funding options include invoice finance, lines of credit, and asset-backed lending.
- Specialist lenders, rather than traditional banks, are the main providers of SBR funding in Australia.
- SBR funding helps stabilise cash flow, pay staff, and meet supplier obligations during critical periods.
- Used responsibly, SBR finance can turn financial distress into an opportunity for recovery and growth.
Small Business Restructuring (SBR) is a formal process that was started in Australia to help struggling companies manage their debts while still being able to do business. Directors can stay in charge while working with a registered restructuring practitioner to come up with a repayment plan for creditors. This process gives businesses the time they need to get their operations back on track and avoid going out of business.
The SBR framework does address how to restructure debts, but it doesn’t automatically fix the cash flow problems that many businesses are having. At this point, financing is very important. Small Business Restructuring finance makes sure that businesses can keep running while their restructuring plan is being worked out by giving them access to working capital.
We’ll talk about what SBR finance is, how it fits into the restructuring process, and why it can mean the difference between staying open and closing for good for many small businesses in Australia.
Small Business Restructuring Overview
In 2021, Australia introduced the Small Business Restructuring (SBR) process to help businesses that are in financial distress. Before this change, small businesses didn’t have many choices. They often had to choose between voluntary administration and liquidation. Directors may lose control during either of these processes, which can be disruptive.
SBR, on the other hand, lets directors keep control of their company while working with a registered Small Business Restructuring Practitioner. The practitioner helps come up with a restructuring plan that explains how debts will be handled and what creditors can expect to be paid back. The business can keep doing business if most of its creditors agree to the plan. It will also be able to pay off its debts in a more organised and manageable way.
A restructuring plan can help with debts, but it doesn’t always fix short term cash flow problems. This is where SBR funding comes in handy.
What is SBR Finance?
The main purpose of SBR finance is to provide funding to businesses that are going through the SBR process. It gives businesses the working capital they need during a time when they need to stabilise and keep trading while undergoing restructuring. This kind of financing lets businesses keep running, pay their employees, and meet their obligations to suppliers.
Why Small Business Restructuring Finance Matters
SBR finance has a lot more benefits than just giving you a quick cash boost. For a lot of small businesses, it’s the only way to stay in business and get back on their feet. Some of the most important benefits are:
- Finance makes sure that the business can keep running every day, even while debts are being reorganised.
- SBR finance helps businesses meet their obligations on time by giving them access to cash exactly when they need it.
- With SBR finance, you can pay your employees on time and keep good relationships with your suppliers, which protects the business’s foundation.
- When creditors see that the business has secure access to funding, they are more likely to agree to and support a restructuring plan.
- Businesses can avoid or lower the amount of debt collection action, legal disputes, or forced insolvency processes when they get the money they need to pay their creditors.
- Instead of worrying all the time about bills that are past due and not having enough funds, directors can focus on the long-term recovery, rebuilding profitability, and getting the company back on track.
- Once the business is stable, SBR finance can help you reinvest in growth opportunities. That could mean getting more inventory or going after new contracts.
Risks and Considerations
Like any form of borrowing, SBR finance comes with responsibilities. Businesses should:
- Ensure the finance aligns with their restructuring plan.
- Avoid taking on more debt than can realistically be repaid.
- Work with lenders experienced in restructuring cases. Contact our team to get connected to the right lenders.
- Seek professional advice before committing to a facility.
Used correctly, SBR funding is not just another loan. It’s a tool for recovery.
Types of SBR Funding
Businesses undergoing an SBR can access a variety of funding options. The most common include:
1. Invoice Finance
Invoice finance allows businesses to unlock the value of unpaid invoices. Instead of waiting up to 90 days for customers to pay, a lender advances most of the invoice amount immediately. This ensures steady cash flow and helps meet urgent expenses.
2. Business Lines of Credit
A line of credit provides flexible access to funds. Businesses can draw down what they need when they need it and only pay interest on the amount used. This is useful during restructuring when cash flow requirements change day to day.
3. Asset-Based Lending
Companies with significant assets, like property, vehicles, or equipment, can raise capital against these assets. This form of finance can provide a larger cash injection to cover operating costs or settle priority debts.
Who Provides SBR Finance Services in Australia?
Not all lenders are willing to provide funding to businesses undergoing a restructure. Traditional banks and many unsecured lenders will consider these businesses too risky. However, there are specialist lenders who understand the SBR framework and the opportunities it creates.
Providers of SBR finance in Australia include:
- Specialist non-bank lenders who focus on supporting businesses under financial pressure.
- Invoice finance providers who advance funds against accounts receivable.
- Private lenders who may offer asset backed or short term cash flow loans.
Working with a finance broker like Dark Horse Financial can make it easier to identify the best lender providing SBR finance in Australia for your situation.
Common Questions About SBR Finance
What is SBR funding?
SBR funding or financing are financial solutions available to businesses undergoing the Small Business Restructure process.
How does SBR finance work in practice?
SBR finance provides liquidity so that businesses can continue trading. For example, if wages are due but cash is tied up in unpaid invoices, invoice finance can release that money immediately.
Is SBR funding available for all small businesses?
Companies that qualify for the SBR process are eligible. Generally, this includes businesses with debts under $1 million that engage a registered restructuring practitioner.
What’s the difference between SBR and liquidation?
SBR is about recovery and continuation, while liquidation is about winding down and selling off assets.
Is there government funding for SBR?
While the government created the SBR framework, funding is provided by private and non-bank lenders, not directly by the government.
Final Thoughts
So, what is SBR finance? It’s a lifeline for small businesses in Australia that are going through the Small Business Restructuring process. SBR finance helps businesses keep running while they pay off their debts by giving them access to working capital and customised funding options.
The right type of financing, whether it’s invoice financing, a line of credit, or asset-backed lending, can mean the difference between going out of business and getting back on your feet.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Get SBR Financing Today
Dark Horse Financial helps Australian businesses get the money they need while undergoing restructuring. If you’re wondering who offers SBR finance services in Australia, we can connect you with the right lenders and help you through the process with confidence.
