Quick answer
A small business restructuring plan lets an eligible company with liabilities of no more than $1m offer creditors a compromise while the directors stay in control. Many plans rest on a lump-sum contribution. Where that money comes from a director, a short-term loan secured on the director's property can fund it, timed to be paid within the plan's deadlines once creditors accept.
Key points
- Eligibility includes total liabilities of no more than $1m and lodgements substantially up to date
- The plan is usually proposed within 20 business days and voted on within 15
- A plan that depends on a specified event allows no more than 10 business days after acceptance for it
- The director's own property is usually the security; the company stays out of the loan
- Funding possible within 24–48 hours once documents are in
- Amounts
- $20k – $5m
- Security
- Director or related property
- Interest
- Can be prepaid or capitalised
- Assessment
- No formal valuation required
A small business restructuring is built for companies that are viable but carrying more debt than they can clear, often to the ATO. The directors stay in control, a registered liquidator acts as restructuring practitioner, and creditors are offered a plan, frequently a lump sum, in exchange for compromising what they are owed.
The weak point of many plans is the money. Creditors are being asked to accept less on the promise of a payment, and they will look hard at where that payment comes from. When the source is a director’s property equity, a secured loan arranged early can make the plan credible and the timetable achievable. This page is about that funding, not about whether restructuring is right for you, which is a question for your practitioner.
How much time does the restructuring timetable leave?
The SBR process runs on business-day deadlines. Your funding needs to fit inside them.
| Stage | ASIC timeframe | What to do about funding |
|---|---|---|
| Considering a restructuring | Before appointment | Talk to us early so the plan can reflect a realistic contribution |
| Proposal period | Generally 20 business days, extendable once by up to 10 | Get a Letter of Offer so the plan can describe confirmed funding |
| Creditors voting | Usually 15 business days | Have loan documents ready to sign on acceptance |
| Plan accepted, depends on a specified event | No more than 10 business days after acceptance | Settle the loan and pay the contribution inside this window |
| Plan running, contravention notified | 30 business days to rectify | Fund a missed instalment before the plan terminates |
Funding is possible within 24–48 hours once documents are in, which suits the 10-business-day window, as long as the paperwork is already done.
Is the company eligible?
ASIC’s guidance for directors, updated June 2025, sets out the core criteria:
- Liabilities of no more than $1m on the day the practitioner is appointed.
- No repeat use. The company must not have been through restructuring or simplified liquidation in the previous seven years, and directors face a similar seven-year rule, with limited exemptions.
- Employees paid. Employee entitlements that are due and payable must be paid, or substantially so, before the plan is proposed.
- Lodgements done. Tax returns, notices and statements must be lodged, or substantially so. The tax debts themselves do not need to be paid.
If those boxes can’t be ticked, a different path is needed, and your accountant or practitioner can advise on it.
What does a restructuring change for creditors and directors?
- Directors stay in control of day-to-day trading. Transactions outside the ordinary course, including paying an admissible debt or selling part of the business, need the practitioner’s written consent.
- Unsecured creditors are held back. They cannot start or enforce claims without consent or court leave.
- Guarantees are paused. Creditors cannot enforce guarantees against a director, their spouse or a relative without court leave during the restructuring.
- Winding-up applications. The court must adjourn one if continuing the restructuring is in the company’s interests. See responding to a winding-up application.
- Secured creditors are only bound to the extent of any shortfall, or if they agree.
- Voting. Affected creditors vote, related creditors are excluded, and a majority in value of those who return statements carries the plan.
ASIC’s June 2025 review of 2022–24 found that 2,820 of 3,388 restructuring appointments moved on to a plan, and that most of the rest ended because creditors rejected the proposal. A well-funded plan is easier to accept.
What do creditors look for in the funding?
Creditors, and the ATO in particular, vote on what they expect to receive and how sure they are of receiving it. A contribution described as “to be funded by the director” invites doubt. One backed by a lender’s written offer reads very differently. When the practitioner prepares the plan, it helps to be able to show:
- The amount and the source. A Letter of Offer for a loan of a stated size, secured on a named property.
- The timing. That the loan can settle inside the specified-event window after acceptance.
- Conditions. Any conditions still to be met before the loan settles, such as a signature from a co-owner of the property.
- No hidden strings. That the funds go to the plan practitioner, not through the company’s general account.
We do not advise on the plan itself or on how creditors will vote. Our role is to make the money side clear enough that it is not the reason a plan fails.
How it works: funding the contribution
- Talk to your practitioner about the size and timing of a lump sum creditors may accept.
- Enquire with us with your property details, the contribution amount and the exit.
- Letter of Offer issued to you as borrower, for the business purpose of funding the company’s plan.
- Plan proposed, describing the funding source.
- Creditors vote. Loan documents are signed and ready.
- On acceptance, the loan settles and funds go to the plan practitioner, who holds them on trust and pays creditors under the plan.
A director borrowing against their own property for the company is a form of third-party security. If the property already has a home loan, a second mortgage behind it is the usual structure. A debt-free property can take a first mortgage.
How does this compare with the alternatives?
| Funding source | Speed | Trade-off |
|---|---|---|
| Company trading profits over time | Slow | Creditors may prefer a quicker lump sum |
| Director savings | Immediate | Rarely large enough |
| Sale of a director’s property | Weeks to months | May miss the 10-business-day window |
| Bank loan to the director | Weeks | Banks may hesitate while the company is in external administration |
| Private loan against director property | 24–48 hours possible | Costs more than a bank loan; property at risk |
Who it suits
- Directors of eligible companies whose plan relies on a lump-sum contribution
- Directors with equity in a home, investment property or commercial property
- Plans where the exit for the director’s loan is clear: a property sale, director income, a refinance once the company’s debts are compromised
When this isn’t the right move
- The business is not viable after the plan. A restructuring compromises old debt; it doesn’t fix ongoing losses. If new debts will keep building, a loan secured on your home only adds risk.
- The contribution is uncertain to be accepted. Arrange a Letter of Offer, but don’t draw the loan before acceptance.
- The company is ineligible. Funding can’t cure an eligibility problem.
- You have no exit. A director loan still needs to be repaid within its term.
What happens to the loan if the plan is rejected?
If creditors reject the proposal, ASIC says the restructuring ends as the proposal lapses. A loan that was offered on the condition of plan acceptance, and never drawn, simply is not needed. That is why we suggest signing documents before the vote but settling only after acceptance. If you want to know whether any cost applies to an approved loan that is never drawn, check the Letter of Offer before you sign.
What it costs (without the guesswork)
Pricing is worked out deal by deal from the security, the loan-to-value ratio, the term and the exit, and we aim for the sharpest price your situation allows. Components:
- Interest for the term, prepaid at the start or added to the loan
- A small assessment fee, which differs from loan to loan and appears on the Letter of Offer
- Legal and title registration costs for the mortgage or caveat
Set that against what the plan saves the company and what a failed restructuring would cost you as a director.
Documents you’ll need
- The practitioner’s appointment details and the draft or final plan
- The proposed contribution amount and its due date under the plan
- Identification for you and any co-owner of the security property
- Address, ownership and current loan balance for each property offered
- Evidence of how you will repay: income, a sale plan or a refinance pathway
- Practitioner contact details so settlement can be coordinated with the plan
How fast can the contribution be paid?
Once documents are in, funding is possible within 24–48 hours, and $20k–$250k possible the same day. No formal valuation required means the property assessment does not add days. Tell us the contribution amount and the plan timetable and we will plan settlement around the vote.
Illustrative example: a lump-sum plan
Illustrative example: a Hobart hospitality company owes $640k, of which $470k is to the ATO. Its practitioner proposes a plan offering creditors a $190k lump sum, payable within 10 business days of acceptance. The director owns a home worth about $950k with $420k owing. A second mortgage at an illustrative LVR band of 70% provides about $245k of headroom.
| Step | Amount |
|---|---|
| Loan amount chosen | $215k |
| Less capitalised interest allowance for 12 months (illustrative) | $19k |
| Less loan costs | $6k |
| Paid to the plan practitioner | $190k |
Creditors accept, the loan settles on business day six, and the contribution is paid on time. The director’s exit is the sale of a holiday unit, already listed. This illustration is not a client record.
Key terms
- Restructuring practitioner: a registered liquidator who supervises the restructuring and the plan.
- Proposal period: the time the company has to put a plan to creditors.
- Specified event: an event the plan depends on, such as receiving a contribution, which must happen within the set time after acceptance.
- Admissible debt: a debt that is dealt with under the plan.
- Related creditor: a creditor connected to the company who cannot vote on the plan.
Other urgent situations we fund
- When an ATO payment plan has defaulted
- Paying an ATO debt with property equity
- A winding-up application against your company
In Tasmania? See our page for a private lender in Hobart and Tasmania. For a director’s personal tax exposure, read our guide to director penalty notices and property equity, and for a refresher on who you are dealing with, see direct private lender vs finance broker.
Plan in progress? See if you qualify
Share the contribution amount, the plan timetable, the property you can offer and what is owing on it. Enquiring involves no credit check, it reaches one direct lender (our lending partner fundU) rather than a broker’s list, and a specialist reads it in person.
Accurate details about the property and its existing loan mean we can tell your practitioner, before the vote, whether the funding is solid. Begin your enquiry.
Frequently asked questions
Our restructuring practitioner says creditors are likely to accept a $180k lump-sum plan. Can I borrow that against my house?
Possibly. A loan to you, secured on your house, for the business purpose of funding the company's plan contribution is assessed case by case. We look at the equity, the amount and how the loan will be repaid, such as from director income, a property sale or a later refinance.
Is my company eligible for a small business restructuring?
ASIC lists the main criteria: total liabilities of no more than $1m on the day the practitioner is appointed, no restructuring or simplified liquidation of the company in the past seven years, directors who meet the seven-year rule, employee entitlements due and payable paid, and tax lodgements substantially up to date. Your practitioner confirms eligibility.
Do our tax debts need to be paid before we can restructure?
No. ASIC says the company must have given its required tax returns, notices and statements, or substantially complied, but the tax debts themselves do not need to be paid. They are usually dealt with in the plan.
How long is the whole process?
ASIC says the plan is generally proposed within 20 business days of the restructuring starting, which the practitioner can extend once by up to 10 business days. Creditors then usually have 15 business days to vote. If a plan depends on a specified event, such as receiving funding, that event must happen within 10 business days of acceptance.
When should I arrange the loan?
Early, ideally while the plan is being drafted. If the plan relies on your contribution arriving after acceptance, you may have as little as 10 business days. Having a Letter of Offer ready before the vote lets the practitioner describe the funding with confidence.
Can the company itself borrow against its own property during the restructuring?
Transactions outside the ordinary course of business need the restructuring practitioner's written consent. That makes company borrowing more complex. A loan to a director secured on the director's property is usually cleaner.
What if creditors reject the plan?
ASIC says the restructuring ends if the proposal lapses, for example because creditors do not accept it. If your loan was conditional on acceptance and not yet drawn, you would not need it. Discuss the alternatives with your practitioner.
Can a bank guarantee be called while we restructure?
ASIC says creditors cannot enforce guarantees against a director, their spouse or a relative without court leave during the restructuring. That moratorium ends when the plan is entered into or the restructuring ends.
We've been served with a winding-up application. Does restructuring help?
It can. ASIC notes the court must adjourn a winding-up application if continuing the restructuring is in the company's interests. Speak to a registered liquidator who acts as a restructuring practitioner straight away.
Who votes on the plan?
Affected creditors vote, and the plan is accepted if a majority in value of those who return their statements agree. Related creditors are excluded and cannot vote.
How long can a plan run?
ASIC says a plan cannot provide for payments on an admissible claim more than three years after acceptance. A lump-sum plan funded by a contribution is often much shorter.
What happens if the plan fails later?
If a plan terminates without being fully satisfied, ASIC says any admissible debt not dealt with becomes due and payable on the next business day. That is why the contribution and any instalments need a realistic source.
Does the ATO usually support these plans?
The ATO votes as a creditor on its own assessment of each plan. ASIC's 2025 review found the large majority of dividends paid from completed plans went to the ATO, which shows how often tax debt sits at the centre of a restructuring.
Can interest on my loan be capitalised so I'm not paying monthly while the business recovers?
Yes. Interest can be prepaid or capitalised, arranged deal by deal, so there may be no monthly repayments during the term. That keeps your personal cash flow free while the company settles into trading under its compromised debt load.