Chapter 1.2
Eligibility Criteria for a Small Business Restructuring Plan
Introduction
The Small Business Restructuring Plan (SBRP) is a lifeline for many small businesses in Australia facing financial distress. This innovative tool, introduced in January 2021, allows eligible businesses to restructure their debts and get back on their feet. However, not every small business qualifies for this program. In this blog, we will delve into the eligibility criteria for the Small Business Restructuring Plan, explore who can apply, the exclusions, and how eligibility is determined.
Who Can Apply?
To benefit from the Small Business Restructuring Plan, you must meet certain criteria:
- Structure and Size: Your business must be a ‘small business entity’ as defined under the Income Tax Assessment Act 1997 (Cth). Typically, this means having an annual turnover of less than $25 million.
- Insolvency: You must be insolvent or likely to become insolvent. Insolvency means that your business is unable to pay its debts as they become due and payable. It’s essential to establish this before applying for the SBRP.
- Legal Entity: You must operate as a sole trader, partnership, or company. This excludes businesses operating as trusts.
- Eligible Debts: The total of your eligible debts cannot exceed $1 million. Eligible debts are generally unsecured debts, excluding employee entitlements and tax debts.
- Tax Compliance: Your business must be up to date with tax lodgments and payments, or have a payment plan in place with the Australian Taxation Office (ATO).
Exclusions
While the Small Business Restructuring Plan can be a game-changer for many small businesses, some are excluded from participating. These exclusions include:
- Large Businesses: Businesses with an annual turnover exceeding $25 million are not eligible for the SBRP.
- Trusts: As mentioned earlier, businesses operating as trusts do not qualify.
- Eligible Employee Entitlements: Debts related to employee entitlements such as wages, superannuation, and leave are not considered eligible debts under the SBRP. They must be paid separately.
- Tax Compliance: If your business has outstanding tax debts without an established payment plan, you may be ineligible.
Assessment Process
Eligibility for the Small Business Restructuring Plan is determined through a structured process:
- Insolvency Assessment: Initially, you must assess whether your business is insolvent or likely to become insolvent. Seek professional advice if needed.
- Debt Calculation: Calculate your total eligible debts to ensure they do not exceed $1 million. You may need to work with your creditors to verify these amounts.
- Tax Compliance: Ensure your tax affairs are in order. If you have tax debts, establish a payment plan.
- Legal Structure: Confirm that your business is structured as a sole trader, partnership, or company.
- Engage a Registered Liquidator: To propose the SBRP, you must engage a registered liquidator who will assist in developing and implementing the plan.
- Creditor Approval: The proposed plan must be approved by creditors representing at least 50% of your eligible debts. It is essential to engage in open and honest communication with creditors to gain their support.
Conclusion:
The Small Business Restructuring Plan can be a vital tool for small businesses in Australia facing financial challenges. By understanding the eligibility criteria, exclusions, and assessment process, you can determine whether your business qualifies for this program. Seeking professional advice from insolvency experts and registered liquidators is often a wise step to navigate this process successfully. If eligible, the SBRP can provide a pathway to financial recovery and a brighter future for your small business.
How can Secured Lending Help?
Small business restructuring plans in Australia provide a lifeline for struggling enterprises to regain their financial footing and continue contributing to the economy.
Short-term business loans play a crucial role in supporting these plans by providing much-needed capital flexibility. If your small business is facing financial challenges, don’t hesitate to explore the benefits of restructuring and consider short-term business loans as a viable solution on your path to recovery and success. Consult with financial experts and leverage the available resources to ensure a smooth and successful restructuring journey.
Secured Lending understand the complexities of debt for businesses and the potential benefits of short-term loans. Our experienced team is here to guide you through the process and helping you explore suitable financing options to address your debt effectively.
Our loan products are designed to provide short term relief in circumstances where funding is not immediately available from traditional sources of finance, such as banks and other first tier institutions. These include:
We aim to implement our solutions as a matter of priority so that you can resume business as usual, with full control of your company.
If you or your client are in need of finance and need to speak to one of our experts, contact us on 1300 795 175 or email us at info@securedlending.com.au
