When the owner is sick or injured: keeping the business funded while you recover

If you’re sick or injured and the business is losing money, borrowing comes after three calls: your insurer, the ATO and your biggest creditors. Once you know what they’ll do, the gap that’s left is what an emergency business loan can bridge. Lenders will want to know who’s running things while you recover and that you can sign.

For most small businesses, the owner is the business. They quote the jobs, chase the invoices, open up in the morning and know where every dollar is going. When that person goes into hospital, has an operation or simply can’t get out of bed for a few weeks, the effect on cash flow is often faster than anyone expects. Work slows, invoices don’t go out, and the bills keep arriving on schedule.

This guide is about getting through that period without losing the business, and where an emergency business loan fits into the plan.

What should you do in the first week?

You may not be the one doing these things. A partner, family member, manager or bookkeeper often has to pick them up. Either way, the order matters:

1. Get someone on the phones and email. Customers and suppliers who hear nothing assume the worst. A short message explaining there’s a delay keeps most relationships intact.
2. Lodge insurance claims. Income protection, business expenses cover, key person cover or anything else you hold. Ask how long assessment usually takes and what evidence they need.
3. Contact the ATO or your tax agent. The ATO’s support page explains it can help with payment plans, and that if you use a registered tax or BAS agent you may have a different lodgment due date. In special circumstances it can also release some taxes where paying would cause serious hardship.
4. Talk to your biggest creditors. Landlord, main supplier, existing lenders. Many will agree to short delays if they hear early and honestly.
5. Invoice everything that’s owed. Completed work that hasn’t been billed is the quickest money available.
6. Work out the gap. Weekly costs that can’t stop (wages, rent, loan repayments) minus what’s still coming in, across the weeks you expect to be away.

That final number, and how long you’ll need it for, is the starting point for any funding conversation.

How do lenders look at a business when the owner is out of action?

Honestly, with more questions than usual. The basics of lending don’t change: the loan has to be repayable. What changes is how a lender gets comfortable with that.

What the lender wants to know	Why it matters	What helps
Who is running the business now?	Trading has to continue for the loan to be repaid	A named manager, partner or senior staff member with authority
How did the business trade before?	That’s the level it’s expected to return to	Twelve months of bank statements and recent BAS
How long will the owner be away?	Sets the length of the gap to fund	A realistic estimate; you don’t need to share medical detail
What’s coming in from insurance?	It may repay or reduce the loan	Policy details and the claim reference
What security is available?	Can carry a loan when turnover has dipped	Property details if you own any
Can the borrower sign?	Documents must be understood and properly signed	Owner well enough to sign, or the right authority in place

You don’t need to share medical records. A plain explanation of what’s happened, how long you expect to be away and who’s covering is usually enough. If you’d like to talk through your situation before it gets any tighter, you can start an enquiry in about a minute.

Which kind of funding fits a recovery gap?

It depends on how long you’ll be away and what security you have.

A few weeks, steady business, no property. Unsecured or cash-flow lending, typically $5k to $500k, sized on turnover and bank statements. This works best when trading has continued fairly normally and the gap is modest. Our working capital loans page covers how these are usually set up.

A longer absence, or turnover has dropped noticeably. Unsecured lenders size their limits on recent deposits, so a fall in banked income can shrink what they’ll offer. Property security lets a lender rely on the property instead. Property-secured business loans run from $20k to $5m, including first mortgages, second mortgages and caveat loans. If the security is your home, our home equity business loans page explains how that works.

Waiting on a specific payment. If an insurance claim or a large invoice will land in a few months, a short facility designed to be repaid from that money can make sense. Our short-term business loans page explains how these are structured.

Who signs if the owner can’t?

This is the question most owners never think about until it’s urgent. A lender can only lend to a borrower who can understand and properly sign the loan documents. For a sole trader, that’s you. For a company, it’s the directors.

If there’s a chance you’ll be unwell for a long time, or unable to manage your affairs for a while, a few steps now can save a lot of trouble later:

• Talk to a solicitor about an enduring power for financial matters. It lets someone you trust act for you, and the rules are set by each state and territory, so get advice where you live.
• For a company, consider whether another director is needed. A trusted partner or senior person who can sign and make decisions keeps the company functioning.
• Make sure someone else can access the business bank accounts and accounting software, with the right permissions rather than shared passwords.

Don’t leave finance applications until the moment you’re least able to deal with them. If you can see a gap coming before surgery or treatment, start the conversation while you’re still well enough to sign.

Illustrative example: an electrician off work after shoulder surgery

This is an illustrative example, not a real client. A sole-trader electrician with one apprentice and a part-time office manager needs shoulder surgery and will be off the tools for about ten weeks. The apprentice can’t run jobs alone, so income will drop sharply. The office manager invoices every completed job, lodges a claim on the owner’s income protection policy and calls the ATO to put the next BAS on a short payment plan.

Even with those steps, there’s a gap of about $45k across the ten weeks: rent, the apprentice’s wages, the van loan and insurance premiums. The owner has equity in their home. Before surgery, while they’re well enough to sign, they arrange a small property-secured facility for the gap, with the plan to reduce it when the insurance payments start. A licensed contractor the owner trusts takes on two larger jobs as a subcontract so the customer relationships hold. Our page on electrician business loans covers how lenders look at electrical contractors.

What can you prepare now, before you need it?

Plenty of owners read this guide while they’re perfectly well, often after a friend’s business went through a rough patch. If that’s you, a little preparation makes an emergency application much simpler later:

• Keep twelve months of business bank statements easy to download, and make sure a second trusted person can access them.
• Lodge BAS and tax returns on time. Up-to-date lodgements are the first thing a lender checks when things go wrong.
• Write a one-page “if I’m out” note: who runs jobs, who pays wages, which customers need a call, where the passwords live.
• Review your insurance with a licensed adviser so you know what’s covered and how long claims take.
• Know what security you have. If you own property, find out roughly what it’s worth and what’s owed on it.

None of this costs much. All of it shortens the time between a crisis and a sensible funding decision.

What if the business can’t keep going?

Sometimes a long illness forces harder decisions: selling, scaling down or closing. A loan won’t help if there’s no realistic way for the business to repay it. The free Small Business Debt Helpline on 1800 413 828 offers confidential help from financial counsellors, including checking whether the business is viable, working out arrangements with creditors and emotional support. Your accountant is the other person to involve early.

Need breathing room while you recover? Here’s the next step

Getting through an illness or injury is hard enough without watching the business slide. If you can see a gap between what’s coming in and what has to go out, it’s worth knowing your options while you can still make the call yourself.

The enquiry takes about 60 seconds and there’s no credit check when you first enquire. We don’t pass your details on to a pile of lenders, so you won’t be fielding calls from strangers while you’re trying to rest. A real person reads your situation and calls you, or whoever you nominate, to talk it through. Please fill in the form accurately, including who’s running the business at the moment, so we can match the right option first time.

See if you qualify for recovery funding →