Cash handling company Armaguard has refused a $26 million lifeline offer from local retailers and banks after its parent Linfox decided to inject cash into the business for its continued operations.

A consortium led by the Australian Banking Association (ABA), the Commonwealth Bank, NAB, Westpac, ANZ, Coles, Woolworths, Wesfarmers and Australia Post previously made the offer to Armaguard with a deadline to respond by last week. The fund was to support the firm which has been struggling since last year due to a significant decline in cash usage.

The conditions of the deal included assurances that the money would be used to support Armaguard’s cash services and would not be diverted to other parts of the Linfox business. The Sydney Morning Herald cited a source saying such conditions were too restrictive and unworkable.

Armaguard CEO Mick Cronin said in a statement that the company still seeks funding support from customers individually, including its retail customers, banks and other key stakeholders, to remain sustainable.

Upon the deal’s rejection, Armaguard announced it would receive a $10 million cash injection from Linfox to continue operating. The parent company was previously unwilling to provide further funding to Armaguard.

In a recent interview with the Australian Financial Review, Linfox executive chairman Peter Fox said he plans to keep Armaguard in business for at least three years.

There’s a catch, however, as banks and retailers would need to pay an additional $50 million a year in fees to put the company on a sustainable footing, according to Fox. Armaguard currently handles 90 per cent of cash movements in the country, which total about $6 billion a week.