Being in debt as a business can be an overwhelming experience, but there are options and free services available to help you get your finances back on track.

Evaluate your financial situation

One of the first steps is to evaluate your debt and the money owed to you. This will give you a clear view of your financial situation.

During this step, consider setting up or updating your financial statement, cash flow forecast and chart of accounts.

You might also want to reach out to an accountant or business adviser.

Arrange your payment priorities

Arrange your payment priorities to help you to identify:

  • what you can afford to pay now
  • what you can pay later
  • what you can put on a payment plan

It’s a quick way to get the creditors off your back and have the time to rearrange your budget accordingly.

Track down money owed to you

Contact non-paying or late customers. If you need help drafting friendly reminder emails, final reminders or a demand for payment, consult our resources on how to manage overdue payments and debt recovery:

Contact organisations you owe money to

Contact your creditors to explain your circumstances and find out your options.

For example, they might:

  • extend the due date on payments
  • allow you to make partial payments
  • set up a payment plan

This may help avoid overdue payment penalties or having your debt passed to a debt collector.

Keep a record of what you discuss. Once you come to an arrangement, make sure you and your creditor have a copy in writing so everyone is clear on the agreement.

Consider using a dispute resolution scheme

Legal proceedings against you generally cannot be started while a matter is being considered by an ombudsman. Many industries – such as banking, telecommunications, energy, water, and insurance – have their own ombudsmen dispute resolution schemes.

Visit the Australian Competition and Consumer Commission website for a list of industry ombudsmen.

Get advice on bankruptcy

Bankruptcy is a legal process that individuals can apply for if they cannot pay their debts. In business, this includes sole traders and the individuals of a partnership. It does not include companies.

There is no minimum or maximum amount of debt or income to be eligible to apply for bankruptcy. To declare yourself bankrupt, you need to meet the following 2 requirements:

  • You're unable to pay your debts when they’re due.
  • You're in Australia or have a residential or business connection to Australia.

Bankruptcy lasts for 3 years and one day. At the end of this period, you are released from most of your debts.

You can become bankrupt in 2 ways:

  • You can volunteer to become bankrupt.
  • Your creditors (those you owe money to) can apply for you to be made bankrupt.

There are 3 other options available under the Bankruptcy Act 1966 to consider before voluntarily entering bankruptcy.

Temporary debt protection (TDP)

Temporary debt protection (TDP) provides you with a 21-day protection period from being pursued by unsecured creditors while you seek help and decide how to proceed.

You can use this time to:

  • seek advice from a free financial counsellor
  • negotiate a payment plan with your creditors – you can do this yourself or authorise someone else to negotiate on your behalf
  • consider if any of the formal insolvency options would be right for you

Once your TDP is accepted, you cannot apply for temporary debt protection again for 12 months.

Debt agreements

Debt agreements are binding agreements between you and your creditors to pay a sum you can afford.

Visit the AFSA website for more information on what a debt agreement is and how they work.

Personal insolvency agreements

Personal insolvency agreements are agreements between you and your creditors to pay an agreed amount in instalments or lump sum.

Visit the AFSA website for more information on personal insolvency agreements.

Get help and advice with business debt

The following free services from agencies and experts can help you manage your debt:

National Debt Helpline

National Debt Helpline provides a step-by-step guide that explains how to fix common debt problems.

Phone 1800 007 007 for free and confidential advice.

Australian Taxation Office (ATO)

The ATO is the principal revenue collection body for the Australian Government. Its role is to manage and shape tax, excise and superannuation systems.

See the ATO's information on tax for small businesses and what to do if you're unable to pay tax debt.

Australian Financial Complaints Authority (AFCA)

Australian Financial Complaints Authority (AFCA) handles complaints about banking, credit, loans and debt collection, life insurance, superannuation, financial planning, insurance broking, stockbroking, investments, managed funds, timeshares, general insurance, finance and mortgage broking.

ASIC's MoneySmart

ASIC's MoneySmart website has information on managing debt, including how to: