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COVID-19: what to do if your SME is struggling financially


  • As the director of a company trading a business, it’s your legal duty to monitor the financial position of your business to ensure it can pay its debts when they are due.
  • Temporary relief measures introduced by the government in response to COVID-19 may protect you from personal liability from insolvent trading for debts incurred in the ordinary course of business.
  • It is vitally important to get appropriate advice from a trusted adviser (such as a financial adviser, accountant, registered liquidator or lawyer) early if you think you will have difficulty paying your debts on time or when relief measures cease.

ASIC’s weekly insolvency statistics have identified a significant decrease in the number of small business insolvencies in the 12 weeks to June 2020. This means that some small businesses may not be seeking appropriate advice about the financial difficulties they were, and are, facing as a result of the COVID-19 pandemic.

Seek advice from a trusted adviser

If your small business has been affected by a downturn in business due to COVID-19, or you are a creditor because your clients or suppliers are in trouble, it is vital to seek advice as soon as possible from a trusted adviser such as a financial adviser, accountant, registered liquidator or lawyer.

Signs that may indicate your company is in financial difficulty include ongoing losses, poor cashflow, unpaid creditors outside usual trading terms and problems obtaining finance.

Temporary relief measures during COVID-19

On 24 March 2020, the Australian Government announced six-month temporary relief for business directors from personal liability for insolvent trading for debts incurred in the ordinary course of business. On 7 September 2020, the Australian Government announced that the temporary relief would be extended until 31 December 2020.  

Despite the temporary relief, as a director you are still required to do everything you can to minimise the risks of trading while insolvent. This includes monitoring the financial position of the business and seeking appropriate advice from a trusted adviser if needed.

As COVID-19 restrictions lift, many small businesses may require extra working capital to reopen and restart. Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to SME lenders, such as banks, for new unsecured loans to be used for working capital.

Other temporary relief measures including JobKeeper, temporary debt relief for individuals and businesses and other support for businesses and employers can assist small business with cashflow. There are also measures giving relief for commercial tenants.

Take steps now

While some small businesses may not have to pay rent temporarily and may have some other debt or interest temporarily deferred, these debts are likely to payable once relief measures are withdrawn.

Small business owners should take steps now to obtain a clear picture of a business’ financial position and future prospects once relief measures cease. It is also important to engage with stakeholders, including suppliers, banks and lending representatives, as soon as possible to discuss your options.

The business may need to be restructured to remain viable. Understanding the financial position of the company, getting early advice from a trusted adviser and acting on that advice in a timely manner will maximise the chances of the business continuing.

Refer to ASIC’s Regulatory Guide 217 Duty to prevent insolvent trading: Guide for directors for more information.

ASIC’s insolvency guide for directors

It’s ASIC’s job to help assist, engage with and protect Australian small businesses. We have resources available to help small business operators, including information for companies dealing with financial distress. See ASIC’s insolvency guide for directors.

Additional information

ASIC is Australia’s corporate, markets and financial services regulator.

Media enquiries: Contact ASIC Media Unit