Short term finance for small business – Financial Distress

Mark Hutchins

Mark Hutchins

Director - Secured Lending

Lesson 2: Managing Short-Term Debt to Avoid Financial Distress


Debt is a common tool that businesses use to fund their operations and growth. However, too much debt, especially in the short term, can lead to financial distress and even bankruptcy. In this blog post, we will discuss some practical tips for managing short-term debt to avoid financial distress.

  1. Understand Your Debt Obligations The first step to managing short-term debt is to understand your debt obligations. This includes knowing the amount of debt you owe, the interest rates, and the payment terms. You should also understand any penalties for late payment or default.

  2. Prioritize Debt Repayment When managing short-term debt, it’s essential to prioritize debt repayment. Focus on paying off high-interest debt first, as this will save you money in the long run. You can also consider negotiating with your creditors to lower interest rates or extend payment terms.

  3. Use Debt to Fund Income-Generating Activities Short-term debt should be used to fund income-generating activities, such as purchasing inventory or investing in marketing campaigns. These activities should generate enough revenue to pay off the debt and generate a profit.

  4. Avoid Overborrowing Avoid overborrowing, as this can lead to financial distress. Only borrow what you need and what you can reasonably repay. Be realistic about your revenue and cash flow projections, and consider the risks associated with taking on additional debt.

  5. Monitor Your Cash Flow Monitoring your cash flow is crucial when managing short-term debt. You need to have a clear picture of your revenue and expenses to ensure you have enough cash to make your debt payments. Implement cash flow management techniques such as forecasting and budgeting to avoid cash flow problems.

  6. Seek Professional Advice If you are struggling to manage your short-term debt, seek professional advice. Consider hiring a financial advisor or accountant to help you develop a debt management plan. They can provide you with expert guidance and help you make informed decisions about your debt obligations.

In conclusion, managing short-term debt is essential for the long-term financial health of your business. By understanding your debt obligations, prioritizing debt repayment, using debt to fund income-generating activities, avoiding overborrowing, monitoring your cash flow, and seeking professional advice, you can avoid financial distress and ensure the sustainability of your business.

The scenario

John is the owner of a small marketing agency that provides digital marketing services to local businesses. Over the past year, John’s business has been growing rapidly, and he has taken on several short-term loans to fund his operations and growth.

However, John’s business is experiencing cash flow problems due to delays in client payments and unexpected expenses. John is struggling to keep up with his loan payments, and he is worried that he may face financial distress if he cannot manage his debt effectively.

To avoid financial distress, John takes several steps to manage his short-term debt. First, he prioritizes debt repayment and focuses on paying off his highest interest rate loans first. He also negotiates with his creditors to extend payment terms and reduce interest rates.

John also implements cash flow management techniques to monitor his revenue and expenses closely. He develops a cash flow forecast and budget to ensure that he has enough cash on hand to make his loan payments on time. He also works on improving his collection process by setting clear payment terms and following up with clients who are behind on payments.

Finally, John seeks professional advice from a financial advisor who helps him develop a debt management plan. The financial advisor provides John with expert guidance on debt consolidation and refinancing, which helps him reduce his interest rates and make his loan payments more manageable.

By taking these steps, John successfully manages his short-term debt and avoids financial distress. He is able to keep his business running smoothly and continue to grow his client base. John learns the importance of managing short-term debt effectively and takes proactive steps to ensure the financial sustainability of his business

How we can help

A small business loan could be the solution you need! At Secured Lending, we offer a range of customisable loan options designed specifically for small businesses. Whether you’re looking to purchase new equipment, hire additional staff, or expand your marketing efforts, we can help you secure the financing you need to achieve your goals. With competitive interest rates and flexible repayment terms, our small business loans are a smart choice for any entrepreneur looking to grow their business. Contact us today to learn more about our lending options and how we can help you take your business to new heights! 

If you need quick access to funds, check out our products to see if we can help, or alternatively, contact Secured Lending at 1300 795 175 or email


financial distress

Secured Lending


Secured Lending focuses on non-conforming, short term funding solutions with incredibly quick turnaround times. So why Secured Lending?
  • We have our own internal property valuation team.
  • We can settle caveats, 1st and 2nd mortgage loans within 24 hours up to $45m.
  • We pride ourselves on being transparent and honest in our approach, always aiming to have an initial assessment back to you in a few hour

Our rates start at 9.95% p.a. with loan terms from 1 – 24 months.

 If you have a scenario to discuss, please call us on 1300 795 175.
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