MICK McCARTHY has been told he will have to generate his own funds if he is to spend his way out of trouble when the transfer window re-opens in January.

Sunderland's latest set of financial results were released yesterday, revealing an £8.8m loss in the 12 months to July 31.

The deficit reflects the considerable investment that was made to secure promotion to the Premiership in May and, while the club's total debt remains stable at around £40m, subsequent spending means McCarthy will not be offered any new funds in January.

Sunderland are guaranteed an extra £10m over the course of this season, but that money has already been spent on the acquisition of 12 new players this summer.

Kelvin Davis, Jonathan Stead and Andy Gray were signed for a total of £4.2m and, while the likes of Tommy Miller, Christian Bassila, Alan Stubbs, Nyron Nosworthy, Joe Murphy, Daryl Murphy and Martin Woods were free agents, their wages and signing-on fees account for the rest of the club's free capital.

As a result, there is no budget for further purchases in January, no matter how perilous a position Sunderland find themselves in at the turn of the year.

"We got between £18m and £19m by winning promotion," explained chief executive Peter Walker. "That's an extra £10m from the income (parachute payments) we had been getting.

"We have spent that £10m on team strengthening, on transfer fees, the commitment to contracts and agency fees. That is just the new players.

"All the additional income has gone into the playing side - there has been no other capital expenditure at all.

"Mick had the money and it was up to him who he bought. He got the cash, as a board we would never try to dictate the players he buys.

"We have tried to support him as best we can - we have put the maximum amount possible into it."

Crucially, though, that investment has been sustainable. When Peter Reid was at the helm, Sunderland's board borrowed extensively in an ultimately unsuccessful attempt to stave off the threat of relegation.

Understandably, they are unwilling to go down the same route again and, with football's financial climate having changed markedly, the option of significant new borrowing is not even open to them.

The club owes £27m to its two biggest creditors, Barclays and Lombard, and its repayments are due to increase this season following promotion to the Premiership.

The banks have agreed to suspend £2m of payments - money which has already been invested in the team - and would be unwilling to sanction more borrowing without seeing a return on their previous investment.

"People say why don't you borrow more money," said Walker. "Where from? From the banks who have got nothing from us for the two years we were in the Championship and who have already accepted less from us this year than they were due?

"If Mick wants to wheel and deal, that will create funds. But we can only spend what we've got."

Such wheeling and dealing looks out of the question given Sunderland's precarious position at the foot of the Premiership.

McCarthy is unlikely to sanction the sale of any of his first-team squad - it is understood he turned down offers for Julio Arca, Stephen Elliott and Dean Whitehead in the summer - despite it being more than two years since the Black Cats received more than a nominal fee for any of their players.

"We made a conscious decision this summer to keep our best players," said Walker. "Why would we want to sell someone, only to have to replace them straight away?"

Yesterday's results revealed the true cost of last season's Championship win, demolishing the myth that it was achieved on a shoestring in the process.

Sunderland committed more than £1m of net expenditure to the purchase of new signings last summer - "a significant investment in Championship terms", according to Walker - and boasted the biggest wage bill outside of the top-flight.

The Black Cats spent more than £16m on wages - 64 per cent of their turnover - and were forced to pay out more than £6m in bonuses and contract upgrades when promotion was confirmed.

Interestingly, more than 20 per cent of the club's wage bill is now incentivised, with the spectre of relegation no longer threatening the kind of financial meltdown it once did.

"That shift has occurred right across the industry," said Walker. "By structuring our wages as we have, we have been able to maximise the money available to Mick.

"It makes sense financially because, if players are being paid for appearances, you're limited to how many people can get the full amount every game.

"It also makes footballing sense. Players get rewarded for doing well, so it's in their best interest to give everything for the cause."

* McCarthy is hoping to have both Danny Collins and Tommy Miller available for Saturday's trip to Arsenal, but has admitted defeat in his attempts to get Christian Bassila back to full fitness in time.

Collins sustained a dead leg in last week's Carling Cup defeat to the Gunners and, with Justin Hoyte, Julio Arca and George McCartney all unavailable, McCarthy will be forced to play teenager Dan Smith if the former Chester defender is unable to travel.

Miller also has a dead leg but is expected to be fit, while Bassila will not be available despite returning to training this week.

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