Your key supplier has gone into administration: funding the switch without stalling

If a key supplier goes into voluntary administration, any deposit you paid for goods you haven’t received usually becomes an unsecured claim, and it can take about five weeks to learn whether the company will survive. You still need stock now. Lodge your claim, plan as if the deposit is gone, and fund the switch to a new supplier on their terms.

It’s one of the most disorienting things that can happen to a business that’s doing nothing wrong. Your orders were placed, your deposit was paid, your customers are waiting, and an email arrives from an administrator you’ve never heard of. Here’s what to expect, and how to keep trading while it plays out.

What happens to your orders and deposits?

Once an administrator is appointed, they take control of the company. ASIC’s guide for creditors explains that the administrator has all the powers of the company and its directors, including the power to keep trading, sell the business or close it.

For a customer, three things usually follow:

• Prepaid deposits become a claim. If you paid for goods that haven’t been delivered, you’re generally an unsecured creditor for that amount.
• You can’t enforce the debt on your own. ASIC notes that unsecured creditors can’t begin or enforce claims without the administrator’s consent or the court’s permission.
• You rank behind others. Secured creditors come first, and employees’ outstanding entitlements are usually paid before other unsecured claims.

The administrator may honour some orders if the business keeps trading, especially where a sale is being explored. Ask, in writing, whether your order will be filled and on what terms.

How long until you know if the supplier survives?

ASIC sets out the timetable. The first creditors’ meeting must be held within eight business days of the administration starting. The meeting that decides the company’s future is generally held within 25 business days, or 30 if it falls around Christmas or Easter, which in practice is usually about five weeks after the appointment.

At that second meeting, creditors vote on whether the company goes back to its directors, enters a deed of company arrangement, or is wound up. A deed can let the company keep trading, sometimes under new owners. Liquidation usually means it stops.

Five weeks is a long time to have no stock. That’s why most businesses can’t simply wait to see what happens. They line up a replacement while the administration runs, and they plan the cash around that decision.

Where does the cash gap actually come from?

Losing a supplier rarely costs just the deposit. Several pressures arrive at once:

Cash pressure	Why it happens	Rough size to plan for
Lost deposit	Prepaid money is now an unsecured claim	The full deposit, until proven otherwise
New supplier’s upfront terms	Unfamiliar customers often pay deposits or cash on delivery	One or two orders paid early
Higher unit prices	Smaller runs, rush orders or a less competitive quote	The difference across the next few orders
Freight and setup	New tooling, samples, artwork or freight lanes	One-off costs
Safety stock	Buying deeper to avoid a second shock	An extra few weeks of stock
Lost sales	Gaps on shelves while the switch happens	Margin on the orders you miss

Add those up over the first two or three months with the new supplier. That’s the gap to fund, and it’s usually bigger than the deposit alone.

While you’re running the numbers, talk to your own customers. A short, honest note that a supplier has failed and you’re switching sources buys more patience than silence does, and it lets you prioritise the orders that matter most. Then talk to your bookkeeper about how to treat the lost deposit in your accounts, because it may sit as a claim for months before anyone knows what it’s worth. And keep every document: the order, the deposit receipt, the administrator’s notices and any reply about your order. You’ll need them to lodge your claim, and a lender will want to see them when you explain the gap in your statements.

If you’re staring at that number now, send us a short enquiry. There’s no credit check when you first enquire, and a real person will work through it with you.

Which finance fits a supplier switch?

It depends on how long the gap lasts and what you’re buying.

• A line of credit suits a switch where the new supplier’s terms will settle down after a few orders. Draw for deposits and early payments, then repay as stock sells. Our business line of credit page explains how revolving limits work.
• A short working capital loan suits a defined, one-off hit, such as a lost deposit plus a stock rebuild. The working capital loans page covers sizing.
• Inventory or trade finance can fit where the replacement supplier is overseas or the stock is large and saleable. See inventory finance and trade finance.
• Property-secured finance, from $20k to $5m, can make sense if the switch is big or comes on top of other pressures.

Unsecured and cash-flow options typically run from $5k to $500k, sized on turnover and bank statements.

What does this look like for a real business?

Illustrative example. A craft brewery buys its printed cans from a single local supplier. It has paid a $30k deposit for a run of 60,000 cans for summer when the supplier goes into voluntary administration.

The brewery lodges its claim with the administrator and asks whether the order will be filled. The answer is uncertain until the decision meeting. Rather than wait, the brewery approaches two other suppliers. The best fit wants half of a $35k first order upfront and the balance on delivery, plus a one-off artwork setup charge. The brewery also decides to keep an extra month of cans on hand from now on.

Adding it up, the brewery needs about $70k over ten weeks: the new order, the setup, the extra stock and a buffer for the lost deposit. It arranges an $80k line of credit, draws in stages and repays from summer sales. When the administration ends in liquidation, the brewery recovers a small dividend on its claim months later, which goes straight back onto the line. Our page on brewery and distillery finance covers how lenders look at producers like this.

How do you check a replacement supplier before you prepay?

You can’t eliminate the risk, but a few checks help:

1. Run a PPSR search. An organisation grantor search on the supplier’s ACN shows registered security interests against its assets, such as finance over stock or equipment. It costs a couple of dollars online. A long list isn’t automatically bad, but it tells you who has first claim.
2. Limit prepayments. Pay deposits in stages tied to production milestones where you can.
3. Keep a second source warm. Even a small regular order with a backup supplier makes the next switch faster.
4. Watch for warning signs. Sudden changes in payment terms, slipping delivery dates and staff turnover are worth a question.
5. Read ASIC’s creditor guides. ASIC publishes information sheets for creditors covering liquidation, receivership and administration, so you know what each process means.

Supplier gone? Keep your shelves full while it plays out

Losing a key supplier isn’t your fault, but it does land on your cash flow first. The businesses that get through it fastest are the ones that line up a replacement quickly and fund the switch properly instead of waiting five weeks for an answer.

Enquiring takes about 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so you won’t be fielding calls from strangers while you’re trying to fix a supply problem. A real person looks at your situation, including the lost deposit and the new supplier’s terms, and calls you. Please fill in the form accurately so we can match the right option first time.

See what your business qualifies for →