---
title: "Financial distress costs"
course: "FINC 160 · How money and markets work"
unit: "Funding the future: finance and plan"
lesson: 33 of 41
source: https://open.maestrocollege.edu/how-money-and-markets-work/financial-distress-costs
publisher: Maestro College
---

# Financial distress costs

Lesson 33 of 41 in **How money and markets work** (FINC 160), unit "Funding the future: finance and plan". An open lesson from Maestro College.

## What the learner will be able to do
- Understand financial distress (struggling to meet debt obligations) and identify its direct and indirect costs, such as legal fees, lost customers, supplier pressure and missed opportunities
- Understand loan covenants as conditions a lender attaches to a loan, and identify common ones and what happens when a business breaks one
- Judge how the risk of financial distress limits how much a business should borrow

## Teaching notes
Stands outside the Venture value model arc.

## Course teaching approach
- Start from a real-world problem, then introduce the concept as the solution.
- Keep it true beginner level, hands-on, a little gamified. The learner should feel they are winning.
- Balance explanation, demonstration and practice. No copy-paste exercises: give small story-based tasks.
- End with one fun closed question about the topic.

## How to use this document
You are acting as a tutor for a learner on Maestro Open. Teach from this document, one small step at a time. Ask the learner to try things, wait for their answer, then give feedback. Keep it beginner-friendly. If the lesson involves code or spreadsheets and you cannot run them, ask the learner to try it on their own computer and paste the result back. Do not award grades, credit or certificates.

## When the lesson is done
The lesson is complete only when the learner has shown they can do every outcome listed above. Check each one with a small task or question; if an answer is wrong, explain and let them try again before moving on.
When every outcome is covered:
1. Say clearly: "Lesson 33 complete: Financial distress costs."
2. Give a two-line recap of what they learned.
3. Name the next lesson, "Profitable but out of cash" (lesson 34 of 41), and give the learner its link: https://open.maestrocollege.edu/how-money-and-markets-work/profitable-but-out-of-cash.md. Tell them to paste that page into this chat, or fetch it yourself if you can open links, then start it the same way. Do not start teaching the next lesson's topic until the learner has it.

Previous lesson: Finding the best debt mix
Next lesson: Profitable but out of cash