Unsecured creditor

Look down a typical business’s list of bills and nearly every name on it is an unsecured creditor. The plumbing supplier on 30-day terms, the electricity retailer, the landlord, the accountant and the ATO all expect to be paid, yet none of them can walk in and take an asset if you fall behind.

Who counts as an unsecured creditor?

ASIC defines an unsecured creditor simply: someone owed money who doesn’t hold a security interest over the company’s property. In a small business that usually means:

• Trade suppliers without a registered retention of title
• The ATO for GST, PAYG withholding and income tax
• Landlords for unpaid rent (unless a bank guarantee or bond covers it)
• Utilities, telcos, insurers and professional advisers
• Many online and fintech lenders, especially those relying on a personal guarantee rather than registered security

Staff owed wages are technically unsecured too, but the law moves them to the front of the unsecured queue.

Where do unsecured creditors rank?

The pecking order matters most if a company is wound up. ASIC’s creditor guide sets out the usual sequence after secured creditors have dealt with their own assets:

1. The liquidator’s fees and other winding-up expenses
2. Employee wages and superannuation
3. Employee leave entitlements
4. Employee retrenchment pay
5. Ordinary unsecured creditors

Each level is paid in full before the next gets anything. Ordinary unsecured creditors then share what remains pro rata, which is where the phrase “cents in the dollar” comes from.

Example: what an unsecured supplier actually gets back

A Perth fit-out company enters liquidation. After the bank has been repaid from its mortgaged property, the liquidator has $310,000 from selling tools, collecting debtors and recovering a preference payment.

Claim	Amount	Paid
Liquidation costs	$70,000	$70,000
Employee wages, super and leave	$100,000	$100,000
Ordinary unsecured creditors (suppliers, ATO, landlord)	$560,000	$140,000

The unsecured group recovers $140,000 on $560,000 owed, or 25 cents in the dollar. A tile supplier owed $40,000 receives $10,000. A supplier that had registered its retention of title on the PPSR could instead have reclaimed its unsold stock.

Why this matters when you’re the borrower

Being on the other side of this list affects you in practical ways:

• Pressure comes through demands, not repossession. An unsecured creditor’s main tools are phone calls, debt collectors, court judgments and a statutory demand, which for a company currently needs an unpaid debt of $4,000 or more and allows 21 days to respond.
• Directors can still be on the hook. If you signed a guarantee, an unsecured company debt becomes a personal one.
• Paying favourites can backfire. Clearing one supplier in full while others go unpaid in the months before an insolvency can be clawed back as an unfair preference.

Lenders also read your unsecured creditor list. A growing ATO balance or suppliers aged past 90 days tells them cash is tight, while a plan to clear those debts can make an application stronger.

If several unsecured creditors are chasing you at once, tell us who’s owed what so we can see whether a single facility would take the heat out of it.

Related terms

• Creditor: anyone the business owes money to.
• Secured creditor: a creditor with security over assets.
• Trade credit: supplier terms that create unsecured debts.
• Insolvency: when a business can no longer meet its bills on time.

Clearing unsecured debt before it escalates

Owners usually come to us once supplier reminders and ATO letters begin piling up. A debt consolidation loan, a property-backed facility or a funded ATO payment arrangement can turn many unsecured creditors into one manageable repayment.

The enquiry is a short form, about sixty seconds long, and making it won’t record a credit check against you. It goes to one specialist here, not out to a panel of funders competing for your number, and that person calls you after reading it. List every creditor with its true balance; precise figures are what let us suggest a workable fix on the first call.

Start sorting out what’s owed →