Quick answer
To avoid liquidation, you need to deal with the debts that could force it — usually ATO debt and any creditor with a statutory demand — while the business can still trade its way forward. ASIC notes that some companies can restructure, refinance or raise equity instead. In practice, that means checking property equity, cash-flow funding and creditor settlements before signing any appointment.
Key points
- Liquidation ends the company; a liquidator takes control and sells assets.
- ASIC recognises restructure, refinance and equity funding as alternatives.
- The test is whether the business is viable once the pressing debts are cleared.
- Checking funding first costs little; an appointment can't be undone.
- Liquidation means
- A liquidator controls and winds up the company
- Alternatives ASIC names
- Restructure, refinance, equity funding
- Property-secured
- $20k – $5m
- Unsecured
- $5k – $500k
Most business owners who end up in liquidation didn’t set out to get there. They got a letter, then another, then made a phone call to a firm that specialises in winding companies up, and the conversation took on a momentum of its own. This page is about slowing that momentum down long enough to ask one question: could this business be funded out of trouble instead?
What does liquidation actually involve?
ASIC describes liquidation as an independent registered liquidator taking control of the company so its affairs can be wound up in an orderly and fair way. In practical terms:
- The directors lose control on the day of appointment.
- The liquidator sells assets and investigates the company’s affairs, including the directors’ conduct.
- Creditors are paid in a set order, often receiving only part of what they’re owed.
- The company is eventually deregistered.
For directors, the personal side matters too. Liquidation doesn’t cancel personal guarantees, and for a lockdown director penalty notice, winding up the company doesn’t remit the penalty at all.
Liquidation is common. ASIC reported more than 11,000 companies entering external administration for the first time in 2023–24, with construction and hospitality leading the list. Many of those were beyond saving. Some weren’t.
What does ASIC say about alternatives?
ASIC’s guidance for directors of struggling companies is direct: unless it’s possible to restructure, refinance or obtain equity funding to recapitalise the company, directors should consider an insolvency appointment. Put the other way around, restructuring, refinancing and new equity are the recognised alternatives.
That’s the space this site works in. Refinancing and fresh funding are how a company with good underlying trade and bad timing gets back on its feet.
How do I know if refinancing could work for us?
Answer these honestly:
| Question | Encouraging sign | Warning sign |
|---|---|---|
| Is the business profitable at its current size? | Yes, or will be once one-off costs pass | Losing money every month with no fix in sight |
| Why did the debt build up? | A clear cause: a late payer, a bad season, a lost contract since replaced | Unclear, or the same cause is still active |
| Is there security or steady cash flow? | Property equity, or reliable turnover in bank statements | Neither |
| What’s pressing right now? | A defined list: ATO, one or two creditors | Every creditor, with no end to the list |
| Is there a way out for a new loan? | Improved trading, a sale, a future refinance | Only hope |
If most of your answers sit in the left column, there’s usually something to work with. If you’d like a lender to look at it with you, tell us about the business — no credit check is involved in asking.
Which funding routes keep a company out of liquidation?
- Property-secured loans of $20,000 up to $5,000,000 — first or second mortgages and caveat loans secured on homes or commercial premises owned by the company, a director or a related party. Read about second mortgages for tax debt and caveat loans for deadlines.
- Unsecured or cash-flow funding, anywhere from $5,000 to $500,000 — the size follows turnover and bank statements. See unsecured rescue funding.
- A consolidation loan that clears the ATO and several creditors in one step.
- Settlement funding where creditors will take a discounted lump sum.
Directors working on a plan like this may also have the benefit of safe harbour protection, provided the conditions are met.
An illustrative example
Illustrative only. A Melbourne café group with three sites falls behind on GST and PAYG withholding after one site underperforms. An insolvency firm suggests liquidation. The directors instead close the weaker site, sell its equipment, and take a second mortgage over one director’s home to pay the ATO in full. The two remaining cafés are profitable, the DPN risk disappears, and the second mortgage is refinanced after a year of clean BAS lodgements.
What should I do before signing anything?
- Pause. An appointment can’t be reversed. A few days spent checking funding rarely hurts.
- Get the numbers. ATO balance by tax type, creditor list, property details and bank statements.
- Use the tools. The debt letter triage tool gives your deadlines; the which-debt-first sorter gives your order.
- Talk to a funder and an independent adviser in parallel.
- Compare outcomes honestly — what’s left for you, your staff and your creditors under each path.
Our guide on whether to sell assets or borrow to clear debt may help with step five.
What mistakes push owners towards liquidation sooner?
A few patterns come up again and again:
- Waiting for a good month. Every month of delay adds interest, reminders and creditors, and removes options. The business that would have qualified for a simple refinance in March may need a far bigger rescue by September.
- Letting lodgements slip. Unlodged BAS turns a manageable DPN into a lockdown one, and makes lenders nervous about what else is hidden.
- Paying the loudest creditor. Money goes to whoever rings most, while the debt with the legal clock quietly runs out of time.
- Signing the first appointment offered. An insolvency practitioner’s job is to run an insolvency process. That’s valuable when it’s the right path, but it isn’t a funding conversation.
- Hiding the problem from the family. Where a home or investment property could fund a way out, everyone who owns it needs to be part of the decision early.
None of these is a character flaw. They’re what stress does to good operators. Knowing them helps you avoid them.
Could your business be funded out rather than wound up?
We’d rather see a business rescued than liquidated, and we’re happy to say so plainly when the numbers work. We’ll also tell you if they don’t.
It takes about a minute to tell us what’s going on. There’s no credit check when you first enquire, and we don’t pass your details around a line of lenders. A real person reviews your situation and calls you. Please be accurate about the debts, the deadlines and what the business and its directors own — it’s what lets us give you a real answer on the first call.
Frequently asked questions
How can I avoid liquidating my company?
Clear or settle the debts that are forcing the issue — typically ATO debt and any creditor with a statutory demand — using refinance, property equity, cash-flow funding or a negotiated settlement, while the business keeps trading. This only works if the business is viable once those debts are dealt with.
What happens to my business in liquidation?
ASIC explains that an independent registered liquidator takes control of the company so its affairs can be wound up. Assets are sold, creditors are paid in order, and the company ends. Directors lose control from the day of appointment.
Is it too late once a creditor has applied to wind up my company?
Not always. Until a winding-up order is made, the debt can still be paid or settled, although other creditors may seek to continue the application. Act quickly and get legal advice.
Will a lender fund a company that's close to liquidation?
Some will, usually with property security, when the loan clears the pressing debts and leaves a business that can repay. They'll want to see why things went wrong and why the future looks different.
What if the business isn't viable?
Then more debt isn't the answer, and an orderly insolvency process with good advice may be the right course. An honest funder will tell you if the numbers don't work.