Small Business Restructuring (SBR) can help eligible construction companies manage existing debts while continuing to trade. It allows directors to stay in control of the business and work towards financial recovery without immediately entering liquidation.
Free Download: SBR Eligibility Checklist for Construction
On This Page
- Introduction
- How SBR Works
- Is Your Business Eligible?
- Common Industry Debts That Can Be Included
- Benefits for Construction Companies
- Challenges and Limitations
- SBR vs Liquidation
- Practical Preparation Steps
- Next Steps
- FAQs
Introduction
Cash flow challenges are common in the construction industry, even for businesses with a full workload. Delayed progress payments, rising material costs, and unexpected project issues can quickly put pressure on a company’s finances.
If those challenges are becoming difficult to manage, Small Business Restructuring (SBR) may provide a way to regain control without closing the business. The sections below cover how SBR works for construction companies, who is eligible, and what to consider before getting started.
How SBR Works
Construction businesses often deal with delayed payments, rising material costs, subcontractor expenses, and cash flow gaps. Small Business Restructuring (SBR) gives eligible companies an opportunity to deal with existing debts while continuing to operate.
The process generally follows these steps:
- A registered Small Business Restructuring Practitioner reviews your financial position.
- The practitioner confirms whether your business is eligible for SBR.
- Directors stay in control of day-to-day operations throughout the process.
- A restructuring plan is prepared, outlining how creditors will be repaid over time.
- Eligible creditors vote on the proposed plan.
- If creditors approve the plan, you make the agreed repayments while continuing to trade.
Unlike liquidation, the goal is to help the company complete projects, maintain client relationships, and improve its financial position rather than closing the business.
Is Your Business Eligible?
Not every business qualifies for SBR. The process is designed for companies that are experiencing financial difficulties but still have a realistic pathway to recovery.
Your company may be eligible to appoint a restructuring practitioner if:
- It is incorporated as a company
- Total eligible liabilities are less than $1 million
- The company has not recently used SBR or certain other formal insolvency processes
Separately, before a restructuring plan can be put to creditors, the company also needs to have:
- Paid employee entitlements that are due and payable
- Completed required tax lodgements
These aren’t conditions of appointing a practitioner in the first place — a company can start the SBR process and work on bringing lodgements and entitlements up to date along the way. They do, however, need to be resolved before the plan itself can be proposed to creditors.
Common Industry Debts That Can Be Included
Construction companies often owe money to multiple parties at the same time. SBR can help deal with many unsecured business debts through a single restructuring plan.
These may include:
- Trade supplier invoices.
- Subcontractor payments.
- Australian Taxation Office (ATO) debts.
- Outstanding business loans that are unsecured.
- Equipment rental arrears.
- Unpaid professional service fees, such as accounting or legal costs.
- Commercial lease arrears.
Some secured debts may remain outside the restructuring plan, depending on the creditor’s security rights and the circumstances of the business.
Benefits for Construction Companies
Construction projects often run over several months, making business continuity especially important. SBR allows eligible companies to continue working while addressing financial pressure.
Key benefits include:
- Directors remain in control of the business.
- Existing projects can usually continue.
- Staff and subcontractor relationships can be maintained.
- Creditors receive a structured repayment proposal.
- The business avoids the immediate closure associated with liquidation.
The process is generally faster and more cost-effective than many other formal insolvency options. It provides an opportunity to restore financial stability while protecting business value.
For construction businesses with strong future work but temporary cash flow challenges, SBR can provide valuable breathing space.
Challenges and Limitations
Small Business Restructuring is not suitable for every construction business. It works best where the business can generate enough future income to meet the repayment plan.
Potential challenges include:
- Strict eligibility requirements must be met.
- Creditors must approve the restructuring plan.
- Ongoing cash flow must support future repayments.
- Some secured creditors may continue to enforce their rights.
Directors must continue meeting their legal obligations throughout the restructuring process.
SBR vs Liquidation
Both SBR and liquidation are formal insolvency processes, but they serve very different purposes.
| Small Business Restructuring | Liquidation |
| Business continues trading | Business usually stops trading |
| Directors remain in control | Liquidator takes control |
| Focuses on repaying creditors through a restructuring plan | Focuses on winding up the company and selling assets |
| Existing contracts may continue | Contracts are often terminated or completed by others |
| Aims to preserve the business | Ends the company’s operations |
If your business still has profitable projects, future contracts, and the ability to recover, SBR may provide a better outcome than closing the business through liquidation.
Practical Preparation Steps
Taking action early gives construction businesses more options before financial pressure becomes unmanageable.
Before speaking with a restructuring practitioner, it helps to:
- Prepare up-to-date financial statements.
- List all creditors and outstanding debts.
- Review current construction contracts and future project pipeline.
- Identify overdue tax obligations and complete outstanding lodgements.
- Prepare cash flow forecasts.
- Gather information about employees, subcontractors, and major suppliers.
Next Steps
If your construction business is facing ongoing cash flow challenges, taking action early can improve your chances of successfully restructuring the business. Seeking professional advice before financial pressure worsens allows you to assess your options and make informed decisions.
Practical next steps include:
- Review your cash flow and outstanding debts.
- Prepare current financial records and tax lodgements.
- Identify all creditors and amounts owed.
- Confirm your eligibility for Small Business Restructuring.
- Speak with a registered Small Business Restructuring Practitioner.
At Halo Advisory, we help directors understand the financial and legal implications of Small Business Restructuring, including personal guarantee obligations. Financial expert Greg Bartels offers a no-obligation consultation to assess your situation, explain your options, and help you develop a practical strategy to protect both your business and your personal financial position. Get in touch today.Â
FAQs
Can my construction company take on new projects during Small Business Restructuring?
Yes. If continuing to trade is in the best interests of the business, construction companies can generally tender for and complete new projects while undergoing Small Business Restructuring.
What happens to retention money during Small Business Restructuring?
Retention money is treated according to the terms of the construction contract and applicable laws. Whether it forms part of the restructuring will depend on how those funds are held and who is legally entitled to them.
Will Small Business Restructuring affect my builder’s licence?
Small Business Restructuring does not automatically result in the loss of a builder’s licence. However, licensing requirements vary between states and territories, so it is important to understand any obligations that apply to your business.
Can I continue paying employees and subcontractors during Small Business Restructuring?
Yes. Ongoing business expenses, including employee wages and payments to subcontractors working on current projects, are generally paid as part of normal trading while the business continues operating.
What if a client finds out my business is in Small Business Restructuring?
Many construction businesses continue delivering projects successfully during SBR. Being transparent where appropriate and maintaining project performance can help preserve client confidence and business relationships.
Can disputed construction debts be included in a restructuring plan?
Disputed debts may require further assessment before they can be dealt with under a restructuring plan. Your restructuring practitioner can explain how disputed claims are handled in your specific circumstances.
Does Small Business Restructuring protect my company from every creditor action?
No. While SBR provides important protections, some secured creditors may still be able to enforce their rights depending on the nature of their security and the circumstances of the debt.
