Why SMEs Shouldn’t Overlook a Restructuring Plan
For many small and medium-sized businesses, restructuring options can feel limited. When cash flow tightens and creditor pressure builds, directors often assume the only realistic routes are a CVA, administration or liquidation.
However, there is another tool that is increasingly relevant for SMEs – the Restructuring Plan.
Originally seen as something designed for large corporates with complex capital structures, Restructuring Plans are becoming more accessible and, in the right circumstances, can offer a powerful alternative to formal insolvency.
What Is a Restructuring Plan?
A Restructuring Plan is a court-supervised process that allows a company in financial difficulty to reach a binding compromise with its creditors and, where necessary, shareholders.
Unlike more informal negotiations, a Plan can:
- Bind dissenting creditors through a cross class cram down (CCCD)
- Restructure secured and unsecured debt
- Compromise shareholder rights where appropriate
- Provide a clear, court sanctioned outcome
In simple terms, it is a structured way to reset a company’s balance sheet while keeping the business trading.
Why SMEs Often Dismiss It
Historically, many smaller businesses have ruled out Restructuring Plans for three main reasons:
- Perceived cost
- Concern about court involvement
- Assumption that it is “only for big companies”
While the process does involve court approval, recent developments have made it more streamlined, particularly for straightforward cases with a limited creditor base.
In reality, for the right SME, a Plan can sometimes be faster and more decisive than prolonged informal negotiations that ultimately fail.
When Might a Restructuring Plan Be Suitable?
A Restructuring Plan may be worth exploring where:
- The business is fundamentally viable but overburdened by historic debt
- There are complex creditor groups with competing interests
- A key creditor is blocking a wider rescue proposal
- Directors need certainty and finality, rather than ongoing negotiation
For SMEs with tax liabilities, lender exposure or lease commitments that cannot be addressed through informal agreement alone, the ability to bind all affected creditors can be a critical advantage.
Not a First Step, But Not a Last Resort
A common misconception is that a Restructuring Plan is a measure of last resort. In practice, it sits somewhere between informal turnaround discussions and formal insolvency.
It is a strategic option. Used early enough, it can preserve value, protect employment and give a viable business a genuine second chance.
Taking Advice Early
Every situation is different. What works for one SME may not work for another. The key is understanding the full range of options before pressure escalates.
At Bretts Business Recovery, we work with directors to assess viability, creditor dynamics and restructuring routes in a clear and practical way. If your business is facing sustained financial pressure, it is worth exploring all available tools, including those that may previously have seemed out of reach.