Re: Anyone got...
My limited understanding:
Someone builds a business which sells stuff and makes a profit. This has obvious value, and should keep on going if the income from sales pays for purchasing stock, paying staff and paying for infrastructure. More money in than out and the owner can take the surplus out at the end of the year. A bit like a salary.
Let's look at the salary thing. If you have a salary, say, of 30k you can usually borrow money based on being able to repay the INTEREST each month, not necessarily the capital. See bad credit card debt.
Looks like a business is much the same. You can borrow money against future revenue and you are judged on your ability to service the debt - that is, repay the interest each month not repay the complete loan. If a loan is coming due then you just take out another loan to pay it off - see bad credit card debt (again) and sub-prime mortgages.
All fine and dandy if you are borrowing the money then taking it out of the company as dividends and salary. The company rolls on because it can service the debt. However rinse and repeat enough times and the balance sheet shows that the company has far more debts than assets and dosen't have a hope in hell of paying its debts.
At that point suppliers want cash up front, and insurers won't cover credit agreements. Cue death spiral.
The company is basically in the same position as someone with a 95% mortgage on a house (so little equity to release) and a pocket full of maxed out credit cards. At some point all the money coming in is needed just to service the debt and there is no more credit available. No money for food, heat, light, clothing, council tax etc.
Lenders try to avoid this with personal credit. $Deity alone knows why they allow this kind of thing for companies,