Switchboard Finance Logo – Liquidation Glossary

Liquidation

Liquidation is the legal process of winding up a company that cannot pay its debts. Once a business enters liquidation, its assets are sold to repay creditors, the company ceases trading, and the event is recorded on business credit databases and ASIC records. Liquidation impacts both the company and its directors when applying for Business Loans, Working Capital Loans, Business Lines of Credit, Equipment Finance, and Low Doc Finance. Related terms: Bankruptcy, Default, Arrears.

Why Liquidation Matters

Liquidation indicates severe financial insolvency and impacts both company and director creditworthiness. Directors from recently liquidated entities often face stricter assessments and must provide strong evidence of stability when applying for finance across the Tradie Hub, Truckie Hub, Café Hub, and Whitecoat Hub.

What Liquidation Shows

  • Company insolvency or inability to continue trading.
  • Serious credit risk at both business and director levels.
  • Limited borrowing capacity for affected directors.
  • Higher scrutiny for Invoice Finance and unsecured products.
  • A requirement to demonstrate financial recovery before reapplying for credit.

Official info: asic.gov.au

How long does liquidation stay on record?
Liquidation stays on ASIC and business credit records for several years, depending on the reporting body.
Can directors get finance after liquidation?
Yes — but lenders require evidence of stable trading, clean bank statements, and solid financial recovery.
Does liquidation affect personal credit?
No — unless the director had personal guarantees, which may lead to defaults recorded on their file.
Is liquidation the same as bankruptcy?
No — liquidation applies to companies, while bankruptcy applies to individuals.
Can liquidation be reversed?
Yes — but only through court action or if debts are settled before finalisation.