Financial hardship occurs when you’re unable to meet your existing financial obligations for a period of time. It may be caused by any number of factors, such as including a major natural disasters, unforeseen weather events, health epidemics, or a major change in your circumstances, such as illness or injury.
While an emergency event can damage or even destroy your business, a strong recovery begins before the event occurs. Don’t delay in taking actions to mitigate your loss; seek legal and financial advice right away. Delaying action could lead to your business owing a lot more than it is ever able to repay.
There are certain steps you can take to seek relief from your payment obligations while you get your business back up and running.
Time is a critical factor when it comes to overcoming financial hardship. The earlier you act the more options may be available to help you get through the tough times.
If you can see you are struggling to make payments, seek help immediately. You may be eligible for financial relief on ongoing commitments such as taxation, council rates, loan repayments, credit card bills, energy and water bills, phone/internet bills and insurance premiums.
Contact your bank/lender
Banks have special hardship teams ready to help customers who are dealing with hardship, for example, as a result of the impact of the bushfires. Assistance could include deferring loan payments, waiving fees and charges, helping with debt consolidation and deferring upcoming credit card payments.
It's really important to know that if you cannot make full repayments, it's in your interest to keep making some repayments to the loan. Even partial payments can help demonstrate to your lender that you want to get back on track and your lender will be less likely to take legal action.
Putting a request in writing
If the request for hardship must be made in writing, there are useful templates available that allow you to simply input your details and generate a formatted letter.
It's important to note that applying for a hardship variation or having a hardship variation accepted will not affect your credit rating or be listed on your credit report. It's possible that late payments may be listed on your credit report even if you have an arrangement to pay less or not at all.
When you ask for a hardship variation you should include a request that the lender does not list a default on your credit report or report your payments as being overdue on your credit report.
Ask your lender how they plan to report your repayment history information. If your lender agrees to your repayment arrangement but plans to continue reporting your payments as late on your credit report, you should make a complaint to the Australian Financial Complaints Authority.
Before you take on any more debt
Before you take on any additional debt with any other party to meet an urgent financial need, it is recommended that you explore options with your financial advisor, business advisor, a financial counsellor and/or your bank or financial service provider. Be aware of security arrangements, high fees and interest rates.
The Australian Financial Complaints Authority (AFCA)
If you approached your bank or financial service provider and your request for hardship assistance is denied, you can contact AFCA for help. AFCA can hear complaints from small businesses whose loan facility is less than $5 million. Contact AFCA or call 1800 931 678.
Speak to a qualified financial counsellor
There are free financial counsellors who can speak with you about your financial recovery plan and may help you with your application for hardship. Find your nearest financial counsellor.
Rural financial counsellors can provide free financial counselling to primary producers, fishers and small rural businesses. Find your nearest rural financial counsellor.
Get free business advice
Business Connect is a fully subsidised service from the NSW Government. You can access free advice from a professional who has experience in running their own small business. They’ll be able to advise you on matters such as managing your cash flow and accessing financial support schemes. In addition, they can assist you to develop an action plan and strategies to deal with the short, medium and long term impacts of recovery. Find out more.
Seeking financial hardship assistance from service and utilities providers
You can also contact your telecommunications, energy and water providers for financial hardship assistance.
If they have not helped to resolve the issue, you may be able to seek further help from:
Energy and Water Ombudsman NSW (regarding all energy and some water providers)
Telecommunications Industry Ombudsman or call the National Disaster Line on: 1800 046 686
If you have lodged a claim in relation to a natural disaster or business continuity and had it rejected, or you’re unhappy with the response, you have the right of appeal with the insurance company. If a resolution still can’t be found, you can ask the Australian Financial Complaints Authority (AFCA) for an external review. AFCA on 1800 931 678.
Government recovery packages bush fire, flood and drought affected communities
Federal and state government recovery packages to support small businesses are available. Packages include grants and concessional loans as well tax deferrals for eligible businesses.
Motor Vehicle Stamp Duty Relief
Motorists whose cars have been written off as a result of a natural disaster may be eligible for a stamp duty refund on their replacement vehicle. Find out more.
If you’ve been affected by natural disasters, Revenue NSW can help with payroll tax. Call 1300 138 118 to discuss your situation.
The Australian Tax Office offers support to businesses affected by the bushfires who are feeling overwhelmed or are getting behind with their tax and super obligations.The ATO may be able to give you more time to lodge or pay, waive interest charged, set up payment plans with interest free periods or see if you qualify for early access to your money or super. Find out more.