RSM Australia

What your bank may do when you can’t pay a business debt

Restructuring Insights

The day you walked into your bank and asked them to fund new equipment or supplies for your start up or company expansion, you probably never dreamed a time would come when you couldn’t pay it back.

But somewhere along the way, things didn’t go as planned and challenges kept arising…and now you find yourself with a debt you can’t afford and creditors who call every other day wondering when they’ll get paid.

Unfortunately, this is not an uncommon scenario. Business can be tough, and owing money to a creditor when you don’t have the cash flow to pay it can make the situation feel a lot worse.

From the creditor’s perspective, they may also have no idea what to expect or what to do next. They have lent the money, and perhaps all they know is that you aren’t paying it back and they’re not sure if you ever will.

This is why most banks will ask an expert accounting firm to conduct an investigating accountants report before they make a decision.


What an investigating accountants report is designed to do

Forcing a company into liquidation to recover money owed to a creditor is time consuming. It also means the end of a business, which nobody wants to see happen. This is why a secured creditor will generally take certain steps on the road to pursuing their debts.

If your bank has given you a secured loan – meaning they have loaned you money for equipment or supplies that they have security over – and you aren’t repaying the debt, they may seek objective advice in the form of an investigating accountants report.

This report tells them what’s happening in the business, and how likely the business is to repay the debt in the near future. The bank uses this information to make an informed decision.

They may decide to:debt

  • pursue immediate enforcement action
  • give your business more time to recover
  • accept a varied payment plan
  • in special circumstances, grant an additional loan or line of credit

Your bank’s lending agreement generally includes a clause that allows them to seek an investigating accountants report.


How we compile information for the report

If a secured creditor asks us to investigate your business, we’ll contact you to arrange a meeting.   

You should prepare for the meeting, because we’ll use this time to:

  • look at your financial records and forecastsdebt
  • review your business plan
  • talk to you about the challenges you’ve been facing
  • find out your plans for recovery

Our goal is to get a complete understanding of what’s happening in the business, and its prospects for the future.

After we provide the report to the secured creditor, they’ll decide what action to take.


What to do next

Waiting for an accounting firm to conduct a review can be a stressful time. But you should view it as an opportunity to lay the cards on the table and be forthright about what’s happened in the business and how you plan to turn it around.

If a secured creditor hasn’t asked for an investigating accountants report yet, but you’re concerned about your business’s future, get advice now.

Our expert advisory team can help you assess areas of strength and weakness, opportunities for recovery, and how to implement a practical plan to turn the company around or wind it up on your own terms.


To chat with a specialist about your business debt, contact the restructuring and recovery team at your nearest RSM office.