Glossary entry
Bust-out
BUST-owt
Definition
BUST-owt
Taking control of a solvent business, ordering goods on its established credit, selling the goods for cash, and abandoning the business to its creditors and to bankruptcy.
“The restaurant was bust-out within four months, and the owner was left with the debts in his own name.”
A bust-out usually begins with a debt. An owner who cannot repay a loan takes a partner instead, and the partner takes a set of keys and the company chequebook.
What follows is mechanical. The business orders from its suppliers on the credit it has spent years earning — liquor, electronics, meat, whatever it can plausibly take delivery of — and the stock is sold immediately for cash at a fraction of its value. Nobody pays the suppliers. When the credit is exhausted the business is put into bankruptcy and the original owner, whose name is still on everything, is left facing the creditors.
It is among the most destructive rackets in the repertoire precisely because the business was working before it started. Loansharking takes interest from somebody who is already in trouble; a bust-out converts a functioning company into cash and leaves nothing.