The business needs fresh cash as well as debt relief.
Reducing old debt does not necessarily fund the next operating cycle. Build a separate working-capital requirement so a rescue plan can deliver new work as well as address arrears.
Corporate Recovery Partners
01 / 06
The debt deal leaves no money for materials
An electrical contractor negotiates proposed reductions with several creditors. The owner celebrates the smaller debt total, then discovers there is no cash for materials on the next accepted job. The compromise may help the balance sheet, but trading still needs funds before the customer can be billed.
List money required for the proposed debt arrangement and money required to operate. Include wages, materials, ordinary overheads and any professional fees. Identify which amounts are due before new receipts arrive.
Do not count the same investor contribution as both a settlement fund and working capital. Each dollar should have one clear purpose in the plan.
Start with accepted work, its delivery costs and realistic billing and payment dates. Business.gov.au cash-flow statements track incoming and outgoing money, including the timing that creates a shortfall.
Test whether job deposits or staged claims are actually agreed and sufficient. An intention to change future terms is not cash available to perform an existing contract.
Business.gov.au distinguishes debt and equity funding. Compare the cost, security, ownership implications and timing of any proposed finance with the specific operating gap.
Ask how new borrowing would be repaid without undermining the debt arrangement. If funding depends on a sale or another approval, keep those conditions visible rather than treating the rescue as fully financed.
Have the accountant and qualified adviser test whether current work generates enough contribution after ordinary costs. Extra cash can fund a timing gap; it does not by itself repair persistently loss-making jobs.
Coordinate funding and creditor terms so the arrangement can be performed together. If neither sufficient working capital nor a viable operating plan is available, seek advice on alternatives before accepting new commitments.
