The debt is cleared: review the emergency credit you kept
Review emergency borrowing facilities after debt repayment without treating available credit as cash or assuming cancellation is always best.
Corporate Recovery Partners
01 / 06
Emergency funding can outlive the emergency
An overdraft or other facility may have helped the business through a difficult stretch. After the debt is repaid, its limit can remain on the banking screen. That number is easy to treat as a permanent cushion, even when nobody has reviewed its cost, conditions or intended use since the crisis.
List each remaining facility separately from ordinary bank accounts. Record its limit, current drawn amount, charges and any review date shown in the documents. Ask the provider to explain unclear terms. Avoid deciding from a balance screen alone, especially if a personal guarantee or security formed part of the arrangement.
Business.gov.au's cash-flow guidance starts with the opening bank balance and tracks receipts and payments. Use that approach to see how operations perform before a fresh drawdown. Keep proposed borrowing separately identified. Otherwise, a forecast can appear healthy merely because the spreadsheet silently assumes the facility will always cover the difference.
Imagine a hypothetical joinery business with $18,000 in its account and an undrawn $30,000 facility. A planned machinery purchase costs $25,000. Calling its available resources $48,000 hides the borrowing decision. Showing the purchase against actual cash makes the funding gap visible before the owner commits to paying the equipment supplier.
Keeping, reducing or closing a facility can each have consequences. Compare ongoing charges, genuine seasonal needs, repayment capacity and the provider's conditions with your accountant or adviser. Do not cancel a facility simply to celebrate becoming debt-free, or retain it simply because it has always been there. Check any linked arrangements before changing it.
Record what the facility is for, who can approve a drawdown and when it will be reviewed again. Make the decision specific enough that a busy team member can follow it. If the business needs credit for normal bills every month, investigate that recurring gap rather than describing every drawdown as another temporary emergency.
