Restructure means different things to different people
“Restructure” is a comfortable word. It sounds like reorganising the furniture. In practice, when a business in debt is told to restructure, it can mean one of several very different things:
- an informal arrangement with creditors, such as payment plans agreed one by one;
- a formal compromise under Part 14 of the Companies Act 1993, where creditors vote on a proposal to reduce or defer debts;
- voluntary administration under Part 15A, where an administrator takes control and creditors decide the company’s future;
- liquidation, sometimes with the business sold to a new company controlled by the same people.
Each has different consequences for who’s in charge, what it costs, and who gets paid. Before you agree to any of them, it’s worth seeing them side by side with the option that often isn’t mentioned: refinancing.
Side by side
| Refinance | Informal arrangements | Part 14 compromise | Voluntary administration | Liquidation | |
|---|---|---|---|---|---|
| Who controls the company | Directors | Directors | Directors, usually | Administrator | Liquidator |
| Creditors paid | In full | Over time, usually in full | Often reduced or deferred | As the outcome decides | By priority, often in part |
| Main cost | Loan costs | Your time | Adviser and process costs | Administrator’s fees from company assets | Liquidator’s fees from company assets |
| Supplier relationships | Preserved | Mostly preserved | Strained | Strained | Ended |
| Business continues | Yes | Yes | Usually | Sometimes | Rarely as-is |
This isn’t about which option is “good”. Each exists for a reason. It’s about knowing what you’re choosing.
Why refinancing often gets skipped
Most business owners in trouble talk first to their accountant, and many accountants, sensibly, refer them to an insolvency practitioner when the numbers look bad. The practitioner’s expertise is in formal processes, so that’s where the conversation goes. Funding may never come up, particularly if the bank has already said no and everyone assumes that’s the end of borrowing.
But a bank decline isn’t the end of borrowing. Our lending partners lend where banks don’t: with IRD arrears, defaults, no recent financials, and unusual security.
When refinancing is realistic
Refinancing is usually worth a serious look if:
- The business is viable once the old debts are gone. It can cover wages, rent, current tax and a sensible loan repayment.
- There’s equity in New Zealand property, yours or a supporting party’s. If so, we can probably help, with property-secured loans from $20,000 to $1m as a first or second mortgage.
- Or there’s steady turnover. Without property, unsecured cash-flow loans and business lines of credit may still be possible for businesses trading six months or more, with weaker credit considered.
- You want to keep control of the business you built.
If there’s no equity and the business is losing money every month, a formal process may genuinely be the better path, and we’ll say so.
What a refinance can clear
A complete refinance can pay out, in one settlement:
- IRD arrears, including GST, PAYE and income tax;
- supplier and trade creditors, including any that have issued a statutory demand;
- short-term, private and other expensive loans;
- business credit cards.
Before you sign
Ask anyone proposing a restructure to explain, in writing, who will control the company, what their fees will be and how they’re paid, and what creditors are likely to receive. Our guide lists the questions to ask any insolvency practitioner. Then take a minute to check the funding route. Start an enquiry or call 03 667 4222.