SQL Server backup is corrupted when we actually need to restore it — what recovery options do we have?

If the .bak file itself is corrupted, repeatedly trying the standard restore process may not help. First, keep a copy of the original backup and check whether another usable backup is available.

If there is no clean backup, I'd consider a SQL Server Backup Recovery Tool. For example, SysTools SQL Backup Recovery Tool can scan corrupted SQL Server .bak files, preview recoverable database objects and records, and export the recovered data to SQL Server.

The workflow is basically:

Add the corrupted BAK file: Load the problematic backup.
Scan and preview: Identify and review recoverable database content.
Select required data: Choose the tables and records you need.
Export recovered data: Save the recovered content to a SQL Server database.
Verify the recovery: Check the recovered data before putting it back into production.

If the backup is your only remaining copy of critical data, I'd try recovery on a copy of the .bak before giving up on it.