Ok, here's how it works...
Ultimately, each element (owner, club, lender, league) is tied together by a web of contract law, insolvency law, and football governance. It is by no means simple to separate one from the other.
For the owner of the asset to take out a loan, a security must be registered as a mortgage. The asset is valued, and money is lent against the value, leaving enough headroom for the lender to recover their money in the event of default.
The interest cannot be simply rolled into additional debt unless there is sufficient value in the asset to cover the increase. If there isn't sufficient value, then other assets are used to secure the increase in the loan. This can be another building, a pension fund, players' values or the club itself.
If an owner takes a secured loan on the stadium, then fails to repay interest or capitalises debt into a growing liability, then the lender can enforce its rights under the legal charge. This could lead to the sale of the stadium, administration of the club, or loss of league status.
In the case of SWFC, if the loan is not serviced, a default occurs when:
Interest is unpaid
Covenants are breached
Insolvency looms (balance sheet or cash-flow basis)
This can lead to:
Enforcement by the lender
Appoint an LPA Receiver to take control of the stadium
Initiate repossession or sale
Trigger the administration of the club if insolvency looms
Club enters administration (if unsustainable):
12-point deduction (EFL rule)
Court-appointed administrator oversees asset sales or restructuring
This is when we, the fans, often attempt to rescue or buy the club...ermm