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It’s not always easy to find good business partners, and the possibility of losing one can put real pressure on your business.
If a contracting company you’ve come to rely on – be it for products or crops, livestock, pests, logistics or other services – is at risk of closing due to financial troubles, it’s natural to feel that stress too.
The current economic challenges of inflation, interest rates, and labour shortages are being felt in all sectors and agribusiness is no exception. Coupled with the tax office’s increased focus on recovering outstanding debts, and age-old challenges like maintaining quality business practices, many companies that were already struggling to stay afloat are now at a crossroads.
Fortunately, there are solutions, despite the fact that they’re not always well-known. One such solution is the government’s Small Business Restructuring (SBR) initiative, which has proven valuable for countless small businesses across Australia since it was introduced.
How SBR works
The Small Business Restructuring process involves appointing an SBR practitioner to develop and implement a restructuring plan with the company’s directors. To be eligible, company debt must be less than $ 1 million, employee entitlements and tax lodgements up to date, and directors cannot have used SBR or undertaken a simplified liquidation in the past 7 years.
However, a business with outstanding tax or other creditor debt can often negotiate a significantly reduced debt amount which is then repaid in instalments over time.
For example, let’s say your livestock handler is at risk of losing their business due to an outstanding debt of $300K, which includes ATO debt. If they are eligible for restructuring, the SBR practitioner would develop a proposal to creditors to repay a reduced amount supported by cashflows for a period of up to 3 years.
If the creditors can see value in this proposal over forcing the business into liquidation where they may get nothing, they will generally approve it. As long as they agree and the business keeps up with repayments, it can continue trading.
Saving a struggling business
A good SBR practitioner would also work with the business owner and their accountant to determine how they ended up in a financial pickle in the first place, and what can be done to prevent it from happening again. Sometimes this is as simple as onboarding a bookkeeper, or reshaping business practices to be more financially efficient.
They would also engage with the business’s regular accountant to ensure they are aware of the process and equipped to further support the business into the future.
Because initiatives such as SBR aren’t always well known to small business owners, bringing it to your contractor’s attention could be the one change needed to save their business.
With a little help from an SBR practitioner, they could soon be on track to financial recovery – preventing them from going under and you from losing a valuable resource.
FOR MORE INFORMATION
RSM offers expert Small Business Restructuring advice and has qualified SBR practitioners across Australia. To learn more, simply contact your local RSM office.
