Protecting Your Business from the Financial Storm

You may have seen in recent news that individuals across Australia are feeling the pressures of increasing interest rates. However, businesses are also feeling the strain. An increase in business collapse is anticipated following the Reserve Bank of Australia’s decision to raise interest rates again by 0.25 per cent with discussion of another two increases.

When interest rates rise, businesses are also required to pay more for loans, lines of credit, and other forms of borrowing. This increase in the cost of borrowing can put pressure on a business' cash flow, making it difficult to pay bills and debts on time. Furthermore, the combination of rising interest rates, cost of living pressures and inflation can mean many businesses breach their bank covenants or worse – face insolvency.

In our experience, taking a proactive approach is key. It is important to:

• review your bank documents; 

• consider the consequences of breaching bank covenants before any breach takes place; 

• plan to minimise the consequences; 

• if it all seems too hard, seek legal / accounting advice about your options - e.g. insolvency, restructuring, compositions with creditors. 

At Scoglio Law, we can help. We are experienced in reviewing bank documents and can assist you in planning, including the legal road map that lies in front of your business.