With Liam Bailey and Steve Godwin
When cash flow tightens, fast finance can look like the answer. And maybe for a little while it is, until it isn’t anymore!
What is fast finance? A short-term facility, merchant cash advance or unsecured business loan can seem like the quickest way to cover wages, pay suppliers, or keep the ATO at bay. But in many cases, it does not solve the underlying problem. It simply buys a little time at a very high cost.
At O’Brien Palmer, we are seeing more directors turn to expensive short-term funding to keep trading. The issue is that this type of finance often puts even more pressure on a business that is already struggling.
The result is not recovery. It is acceleration.
Why this type of finance becomes dangerous
Not all business finance is bad. Used properly, funding can support growth, smooth timing issues, or help a viable business manage temporary pressure.
But the warning sign is this: if finance is being used to plug recurring losses, catch up old tax debt, or cover every-day operating costs, the debt can quickly become part of the problem.
Many of these facilities come with:
- very high effective interest costs
- aggressive repayment terms
- daily or weekly deductions
- personal guarantees
- little room for error if cash flow falls again
That creates a dangerous cycle. The business borrows to relieve pressure, then the repayments create new pressure, and the director is left scrambling again just weeks later.
The bigger issue is not the loan, it is what the need for a loan is hiding
In our experience, short-term finance often masks deeper financial problems such as:
- overdue ATO debt
- weak gross margins
- poor cash conversion
- creditor pressure
- non-compliant reporting
- unsustainable trading losses
This is where many directors get caught out. They think they have a funding problem, when in reality they have a structure, solvency, or viability problem.
And once personal guarantees, Director Penalty Notice exposure, or creditor enforcement enter the picture, the risks become personal very quickly. OBP’s recent content has highlighted exactly that trend: more directors are being pushed into personal exposure through tax debt, guarantees, and high-cost lending taken on too late.
The warning signs Directors should not ignore
If any of the following are happening, it is time to get advice:
- you are borrowing to pay BAS, wages, or old debt
- repayments are coming out daily or weekly and hurting working capital
- your ATO debt keeps increasing
- suppliers are being juggled to manage cash
- you are relying on new finance to repay old finance
- you have signed personal guarantees without fully understanding the exposure
That is usually the point where more borrowing stops being a solution and starts reducing your options.
Early advice protects options
One of the biggest misconceptions in insolvency is that speaking to an expert means the business is over. That is not how we see it.
Early advice is about understanding the real position, reviewing the structure, assessing whether the business is viable, and identifying whether there is a practical path forward. In some matters, that may involve informal negotiations. In others, it may mean restructuring, administration, or another formal solution.
The key is timing. The earlier the issue is identified, the more likely it is that directors can protect value, preserve jobs, and avoid making things worse with the wrong kind of debt.
Fast finance can feel like relief in the moment. But if it is being used to prop up an already distressed business, it can deepen the problem and expose directors to much more than they expected.
As Liam points out, “Before taking on another short-term facility, step back and ask the harder question: Is this funding helping the business recover… or is it just delaying the reckoning?”
That distinction matters. And getting it wrong can be expensive.
If your business is under pressure, the earlier you get advice, the more options you are likely to have. Please speak to either Liam Bailey from O’Brien Palmer, or Steve Godwin from Moneytech, to help you make an informed decision.
Liam Bailey, Managing Partner at O’Brien Palmer
(61) 2 9232 3322
obp1@obp.com.au
obp.com.au
Steve Godwin, National Sales Manager, Moneytech
(61) 432 300 686 Steven.Godwin@moneytech.com.au moneytech.com.au