Post-Commencement Finance (PCF) is the new funding secured after a Business Rescue commences to allow the company to continue trading while the rescue plan is developed and voted on. Without PCF, most rescues fail — not because the underlying business is unviable, but because the company simply runs out of cash before the plan can be implemented.
What is PCF and Why Does It Matter?
When a company enters Business Rescue, it is by definition in financial distress. Its existing cash reserves are typically depleted, its credit facilities are drawn down, and its suppliers may be demanding cash on delivery. The company needs new money to keep operating — to pay wages, purchase stock, and meet its post-commencement obligations.
This new money — raised after the commencement of Business Rescue — is called Post-Commencement Finance. It is the financial oxygen that keeps the business alive during the rescue process, which can take several months from commencement to substantial implementation.
The Statutory Super-Preference
The Companies Act gives PCF providers a powerful incentive to lend: a statutory super-preference over all pre-commencement creditors. This means that PCF providers are repaid before any pre-existing creditor — including secured creditors holding mortgage bonds or notarial bonds over the company's assets.
This super-preference is designed to overcome the obvious reluctance of any rational lender to advance new money to a company in Business Rescue. Without it, no commercial lender would take the risk of lending to a company whose assets may already be encumbered by pre-existing security holders. The super-preference makes PCF a commercially viable proposition for funders willing to back a credible rescue.
Who Provides PCF?
PCF can come from a variety of sources. In practice, the most common providers are:
- Existing shareholders who inject additional equity or loans
- Strategic investors or third-party funders who see value in the business
- Major suppliers or customers who have a vested interest in the company's survival
- Specialist distressed debt funds and turnaround investors
- In some cases, existing creditors who convert a portion of their debt to PCF
The BRP plays a central role in identifying and securing PCF. A BRP with a strong track record, a credible rescue plan, and established relationships in the investment and banking community is far better placed to raise PCF than one without those credentials.
PCF and the Business Rescue Plan
The Business Rescue Plan must set out how PCF will be repaid. This is a critical consideration for existing creditors voting on the plan: PCF repayment ranks ahead of their claims, so the larger the PCF quantum, the less that remains for pre-commencement creditors. Understanding the PCF structure is therefore essential for any creditor assessing whether to vote for or against a plan.
Securing PCF: The BRP's Role
Securing PCF requires a credible BRP, a defensible rescue prospect, and the ability to provide funders with confidence that the business has a viable future. Funders will conduct their own due diligence and will not advance money on the basis of optimistic projections alone. They need to see a realistic plan, a competent practitioner, and a management team capable of executing the turnaround.
At MJBusiness Rescue, Mike Benfield's background as a former Group CEO and CFO — with deep experience in raising debt finance across complex industrial groups — is directly applicable to PCF discussions. The ability to speak a funder's language and present a credible operational case is as important as the legal structure of the PCF itself.
Does your company need Post-Commencement Finance? Contact Mike to discuss your rescue funding options.
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