Restructure, Refinance or Run the Auction?

How Brokers Protect SME Value in a Higher-for-Longer Economy

At a recent Sydney seminar hosted by Hermes Capital, industry experts came together to unpack one of the most pressing questions facing brokers today: When a client is under pressure, what’s the right move — restructure, refinance, or run the auction? With interest rates remaining elevated, inflation persistent, and credit conditions tighter, the margin for error has narrowed. The difference between preserving value and destroying it often comes down to timing, structure, and decision-making discipline. The session featured insights from Nick Samios (Hermes Capital), Bruce Connors (Pickles), and Marcus Petrovic (Mackay Goodwin), with Max Szarycz from Hermes Capital facilitating the discussion.

The Core Problem: Easy Money vs Effective Money

One of the strongest themes from the discussion was simple – Not all capital is equal. As Nick Samios explained, money does not solve problems. It buys time to solve them. Fast, easily accessible funding is everywhere. But in many cases, it only buys days or weeks of relief, not the months or years required to properly stabilise and reposition a business. This distinction matters.

Fast money – often comes with high costs and aggressive repayment terms
Structured funding – takes longer to arrange but aligns with cash flow and strategy

For brokers, this is a critical shift in thinking. The goal is not just to secure capital, but to ensure that capital actually supports a viable path forward.

Capital Stacking: The Silent Equity Killer

A recurring issue discussed was the rise of capital stacking. Businesses under pressure are increasingly layering multiple short-term facilities on top of each other. What starts as a single working capital solution can quickly become three, four, or even five overlapping facilities. The result?

Daily repayments are draining cash flow
Increasing cost of capital
Rapid erosion of equity
Reduced restructuring options

As Marcus Petrovic noted, by the time these businesses seek help, they often have limited resources left and far fewer viable pathways. By the third facility, the problem is no longer temporary. It’s structural.

Why Timing Matters More Than Strategy

Across the panel, there was strong alignment on one point – Early intervention is everything. Delays reduce optionality.

Assets deteriorate or fall in value
Equity is drawn down through repeated refinancing
Maintenance is deferred, further reducing recoverable value
Stress limits rational decision-making

Bruce Connors highlighted how asset values can drop significantly when businesses delay action, particularly when maintenance and utilisation decline. By the time decisions are forced, brokers are often working with a much weaker position than originally existed.

The Reality of Asset Values

Another key takeaway was the gap between perceived value and market value. Directors often anchor to:

Purchase price
Written-down value
Emotional attachment

But markets don’t. As discussed in the session, valuations frequently come in below expectations, particularly as markets normalise following the inflated COVID period. For brokers, this reinforces the importance of:

Independent valuations
Early asset reviews
Realistic conversations with clients

Because once equity assumptions are wrong, the entire funding strategy can collapse.

Refinancing: When It Works (And When It Doesn’t)

Refinancing is not inherently good or bad. Its effectiveness depends on what it enables. Refinancing preserves value when:

* It provides runway to execute a clear strategy * Cash flow and repayment structures are aligned * It supports future earnings growth

It destroys value when:

It simply delays the problem
It funds ongoing losses
It increases liabilities without improving the business

As highlighted during the session, repeated refinancing without a strategy often results in equity being consumed by transaction costs rather than business improvement.

Restructuring: Reframing the Narrative

There is still stigma around restructuring, but the panel challenged that perception. Restructuring is not failure. It is a controlled reset. When done properly, it can preserve viable parts of a business and protect jobs. It also resets creditor relationships and creates a pathway back to profitability. The key is having a clear and achievable plan, with an honest assessment of the business model and advisors who are willing to have difficult conversations. As Marcus noted, the role is often about making the best out of a bad situation and in many cases, that means acting before options disappear.

Running the Auction: A Strategic Tool, Not a Last Resort

Selling down assets is often seen as a last resort, but the discussion reframed it as a strategic option. When executed properly, asset sales can:

Unlock trapped equity
Reduce debt
Improve cash flow
Support a broader restructuring strategy

Interestingly, auction environments can sometimes achieve stronger outcomes than expected, particularly when competitive tension is created and assets are marketed effectively. However, timing, presentation, and coordination are critical.

The Broker’s Role: Advisor, Not Just Intermediary

Perhaps the most important takeaway was the evolving role of the broker. This is no longer just about sourcing capital. It’s about:

Diagnosing the real problem
Challenging assumptions
Guiding clients through complex decisions
Protecting long-term value

Clients will often delay, avoid, or seek easier answers. That’s human nature. But as the panel reinforced, the brokers who create the most value are those who step in early, ask better questions, and focus on structure over speed. In a higher-for-longer environment, the margin for error is smaller. Quick fixes are easier than ever to access. But they rarely solve the problem. Structure, timing, and discipline are what protect SME value. And for brokers, that means knowing when to refinance, when to restructure, and when it’s time to run the auction.

Watch the full recording to learn more. Interested in future seminars by Hermes Capital? Check out our upcoming events here.