Business finance when you're recovering from a tough patch

Every business owner who’s been around long enough has a year they’d rather forget. A key customer went under. A flood closed the road for a month. Costs jumped and prices couldn’t follow. Or life happened, and the business took the hit.

If that’s where you are, the first thing to know is that a rough patch doesn’t define what’s possible next. The second is that the way you approach funding now matters more than it did when things were going well. Let’s work through it together.

Can a recovering business still get funding?

Often, yes. It depends on what happened, where things stand today and what you can offer a lender to lean on. Here’s how the main options tend to look for a business in recovery:

Option	Fit while recovering	What helps
Property-secured business loan	Often the strongest fit	Equity in residential or commercial property; a clear repayment plan
Second mortgage or caveat loan	Short-term, situational	A defined exit, such as a refinance or asset sale
Unsecured business loan	Returns as statements recover	Several months of steady deposits after the dip
Line of credit	Usually later	Consistent trading and clean conduct on existing debts

Bad credit and ATO debt are considered case by case. They don’t rule you out, but they do mean the details — and how you explain them — matter.

What do lenders want to hear from a business in recovery?

A lender assessing a recovering business is really asking three things: what happened, is it fixed, and how will this be repaid? You can answer all three before they ask.

• What happened. One or two sentences, factual, no blame game.
• What you did. Cut costs, replaced the lost customer, changed suppliers, restructured staff.
• Where it stands now. The last three to six months of bank statements are your best evidence.
• The plan. How this funding helps and how repayments will be met from here.

Our guide to explaining your business to a lender turns this into a five-sentence script you can use on the phone.

What should you fix first?

Before you borrow, a few moves strengthen your position and often reduce the amount you need:

1. Get lodgements up to date. Even when you can’t pay, lodging BAS and tax returns on time keeps your record clean and shows good faith.
2. Know exactly what you owe. List every creditor, balance, repayment and due date. Include the ATO, suppliers, cards and any short-term advances.
3. Talk to the ATO early. The ATO offers payment plans and, if you owe $200,000 or less, many businesses can set one up online.
4. Stop the bleeding. Look hard at costs that don’t earn their keep. business.gov.au’s financial trouble pages list warning signs worth checking against.
5. Protect your own wellbeing. The Australian Small Business and Family Enterprise Ombudsman has a financial wellbeing hub with free support. A clear head makes better decisions.

When you’re ready to explore funding, you can ask a real person what’s realistic — there’s no credit check when you first enquire.

Is borrowing the right move right now?

Borrowing during a recovery can be the right call, but only when it genuinely helps. Good reasons include clearing an ATO debt that’s creating pressure, replacing several expensive short-term debts with one manageable repayment, or funding a specific step that restores income.

Be more cautious if the loan would only cover ongoing losses without a change in the underlying business. In that case, the priority is fixing the cause first. Our bad year recovery plan gives you a 90-day structure for doing exactly that.

An illustrative example

Illustrative only. A café owner in a regional town lost several months of trade when roadworks cut off foot traffic. She fell behind on her BAS and took two short-term advances to cover wages. Trade is back to normal now, but the repayments on the advances are eating her margin.

Her funding plan flags that she owns her home with reasonable equity. A property-secured loan could clear the ATO debt and both advances, leaving one repayment her normal trading can carry. Her prep checklist includes an ATO statement of account, the payout figures on both advances and a short note explaining the roadworks.

Which mistakes make recovery harder?

A few common moves feel helpful in the moment but make the road back longer:

• Stacking short-term advances. One advance to cover wages, another to cover the first one’s repayments — this is how a temporary dip becomes a long-term problem.
• Ignoring the ATO. Unopened letters don’t make the debt smaller. Early contact keeps more options open.
• Applying everywhere at once. A burst of credit enquiries in a short period can make lenders more cautious, not less.
• Hiding the problem. Lenders will find it anyway. Raising it first, with context, builds trust.

How do you rebuild your funding position over time?

• Keep every lodgement on time from here on.
• Pay down the most expensive debt first.
• Let six to twelve months of steady statements build up — they’re your comeback story.
• Check your own credit report so there are no surprises.
• Revisit your options as things improve; what wasn’t available during the dip may be available now.

Getting back on track? Let’s talk it through

Coming back from a hard year takes grit, and asking for help is part of that. We talk with business owners in recovery all the time and we don’t shy away from bruised credit or ATO debt — we look at the whole picture.

Starting is simple: a 60-second enquiry, no credit check at that stage, and no sending your details to a list of lenders. A real person reads what you’ve told us and calls to talk it through. Please be upfront on the form about credit or tax issues — it helps us find the right fit instead of the wrong one.

See if you qualify →