The allowance had risen to nearly $50 million in the year ended June, compared with $8.6 million in the previous corresponding period.
SCF had been aggressive in its approach, which was good accounting practice.
However, with unemployment set to continue rising it would be no surprise to find more impairment charges on the balance sheet next year, he said.
"Loan defaults have not been sudden. This has been a slow and grinding process. SCF is making allowances for things to go wrong but going from $8.6 million to $50 million is a big increase.
"The next 12 months will be difficult, as unemployment increases. That will start to impact on loans. To their credit, SCF has a diversified loan portfolio but they will be worried."
SCF was cleaning up its balance sheet to meet the new government requirements for the retail guarantee deposit scheme and meeting some of the issues raised by credit rating agency Standard and Poor's.
The Timaru-based finance company yesterday reported a loss of $71.2 million for the year, down from a profit of $88.8 million in the previous corresponding period.
The loss after tax was $67.8 million, down from a nearly $70 million profit in the pcp.
Total income was down slightly at $266 million but expenses rose to $336.9 million from $202 million.
There was a $35 million loss on investments compared to nil last year.
SCF chairman and principal shareholder Alan Hubbard had executed a $25 million underwriting of specific non-performing loans at book value.
The loss for the year caused the group to be in technical breach of the interest coverage covenants on its unused banking facilities.
Those facilities had never been used during the past three years.
Talks were under way with the five subscribers to the $US100 million ($NZ145 million) private placement facility who were entitled to seek repayment within three months following the resetting of the group's credit rating by Standard and Poor's.
Looking forward, Mr Hubbard said the group had been restructured throughout the country to align resources to the core activities which would remain funding business, plant, rural activities and consumer loans.
"As acknowledged by Standard and Poor's in its recent report, South Canterbury is one of the stronger finance companies in New Zealand, underpinned by a sound business profile and broad geographic portfolio of diversified assets."
SCF's owner, the Southbury Group, had appointed Forsyth Barr and Harmos Horton Lusk as advisers to assist in the capital restructuring of the group.
A further announcement would be made within three weeks, Mr Hubbard said.
