Small business requests for insolvency help grow sevenfold

The number of small businesses turning to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) for assistance with insolvencies spiked in the September quarter, revealing how corporate collapses are leaving local traders grasping for help.

In its latest quarterly report, the ASBFEO noted 1,773 corporate insolvencies occurred between July and August 2023, the most in that two-month period since 2015.

Those insolvencies have wide-reaching consequences, as each collapsed business can create many small business creditors — and an anxious wait for reimbursement.

The ASBFEO said 67 businesses contacted its office requesting assistance with an insolvency in the September quarter, up from just nine in the June quarter.

Those figures come from a low base, but still represent a nearly seven-fold increase in the number of requests for help.

“Although these requests are small in number (relative to our total requests for assistance), the impacts for the businesses involved are significant,” the report added.

One small business that contacted the Ombudsman for assistance said responding to the external administrator of a business that fell into liquidation took a day of unpaid labour, adding to the toll of the money already owed.

In other cases, small businesses are not being informed they are actually creditors to a collapsed business.

“For example, a family business in the construction industry had around $13,000 in outstanding invoices from a builder,” the Ombudsman said.

“They were unaware that this business had entered into liquidation until they contacted our office.

“We provided advice about the process for creditors in insolvencies.”

Independent contractors, who are also supported by the ASBFEO, are particularly hard-hit.

The Ombudsman received a request for assistance from an independent contractor in the construction sector who had not been paid for their labour.

“This was highly distressing for them as they had previously ‘lost everything’ in the floods, so had no financial buffers to keep afloat,” the Ombudsman said.

“They were not sure what to do and felt lost and alone. We provided information on the steps to resolve disputes, information on managing finances and mental health support.”

Businesses seeking assistance with insolvency matters can contact the ASBFEO here or via phone on 1300 650 460.