Financial distress is a common challenge for small businesses, but the Small Business Restructuring (SBR) Process offers a lifeline. This simplified, cost-effective mechanism helps financially troubled small businesses reorganise and recover without the heavy burden of traditional voluntary administration.
What is the Small Business Restructuring Process?
The SBR Process provides a structured pathway for small businesses to tackle financial difficulties head-on. By introducing streamlined debt restructuring, it addresses some of the challenges associated with voluntary administration, particularly for small and medium-sized enterprises (SMEs). Unlike traditional methods, the SBR Process allows business directors to maintain control while working with a restructuring expert.
Is your business eligible?
To be eligible for the SBR process, a business must generally meet the below eligibility criteria:
- Classified as small business entities
- Liabilities less than $1 million
Steps of the SBR Process:
Appointment of a Small Business Restructuring Practitioner (SBRP)
Once eligibility is confirmed, the business appoints an SBRP. These professionals specialise in restructuring and insolvency. They guide the business through the process, ensuring legal compliance and offering expert advice.
Development of a Restructuring Plan
The SBRP collaborates with the business owner to create a tailored restructuring plan. This plan outlines changes to operations, finances, and structure aimed at restoring financial health. The director-driven approach gives business owners more control over negotiations with creditors, simplifying the restructuring efforts.
Creditor Involvement
Creditors are notified about the intention to restructure. They vote on the proposed plan, which must gain approval from a majority of creditors, both in number and value.
Implementation of the Plan
Once approved, the restructuring plan is put into action. This might involve:
- Renegotiating contracts
- Downsizing operations
- Selling assets
- Other financial adjustments to improve the business’s position
Monitoring and Compliance
The SBRP oversees the implementation, ensuring compliance with the plan’s terms. They provide continuous support and guidance to the business owner throughout the process.
Completion and Discharge
After successfully implementing the restructuring plan and fulfilling all obligations, the SBRP issues a certificate of discharge. This formally concludes the SBR Process, allowing the business to move forward with renewed financial stability.
The Benefits of the SBR Process
Small businesses can turn to the SBR Process when facing financial hardships like significant debts or declining sales. Here’s why it’s beneficial:
- Eases Debt Load: The process helps businesses manage and reduce their debts.
- Improves Cash Management: Better financial planning and control over cash flow.
- Negotiates New Payment Terms: Businesses can work out more favourable terms with creditors.
- Preserve Jobs: By stabilising the business, jobs are saved.
- Maintains Relationships: Keeps connections with suppliers and customers intact.
- Sets Up for Long-term Success: Creates a solid foundation for future growth and stability.
By streamlining the restructuring process and promoting early intervention, the SBR Process not only helps businesses survive but also thrive, safeguarding livelihoods and contributing to the resilience of the small business sector.
(Article sourced from the Institute of Certified Bookkeepers)
