When you’ve finally got out of the corporate job that made you feel stagnant and insignificant, running your own business can be a sigh of relief for you, because you can be its main driver, and it’s fulfilling to see the persistence you planted grow. However, running a business is very challenging, especially when it comes to a situation where you need to manage your debt while juggling into looking ways to keep the business afloat. If this is your situation, we are here to help you understand what business debt restructuring is and what does it signifies for the future of your business.

What is Business Debt Restructuring?

Debt restructuring is a business strategy move where a company negotiates a set of terms with their credit agencies just to make paying existing debts more manageable. Usually, the goal of the company here is to help their business regain stability first just so they can continue operating and paying their existing debts in the long run. However, everything has its side effects, and debt restructuring is not an exemption.

Credit ratings are affected. One of the first areas that will be impacted by debt restructuring is your credit ratings, as credit agencies will be involved in assessing the financial health of your company, and for them, restructuring often signals distress. However, credit agencies see that restructuring improved the financial stability and cash flow of your business, your credit ratings may gradually improve over time.

Reputation ripple effect. Reputation is another area where debt restructuring can leave a mark, and this can spark some concerns among your stakeholders, suppliers, and even customers as they might question the stability of your company and your future dealings with them. Transparency helps in communicating to them the reason behind the restructuring as it can foster trust and reassurance in how restructuring will improve the operations of your business.

Turning challenges into opportunities. And while restructuring can pose challenges, it also presents an opportunity for reinvention. This is your chance to re-evaluate the the strategies of the company, cut unnecessary costs, and even streamline the operations. In many cases, restructuring can mark the beginning of a new focus and growth in the business.

Practical Steps to Minimise Negative Impacts

If debt restructuring is on the table, consider these practical steps to manage potential fallout:

• Be open to engaging with financial advisors so they can help craft a restructuring plan that minimises credit ratings and reputation damage. Work this closely with your creditors to establish your business’ commitment to recovery, as well as to regularly check your ratings to track improvements and identify discrepancies early on.
• Communicate and keep the stakeholders informed of your restructuring process and let them see the results through efficiency and refinement in operations.

The Australian Perspective

Debt restructuring isn’t a one-size-fits-all solution, and the Australian business landscape has its unique quirks. In addition, business owners should remember that resilience is part of the Australian spirit. At the end of the day, the goal is to emerge from the process more resilient, with a stronger foundation for growth.