The newly confident Bury Football Club dispatched non-league Hemel Hempstead 3-1 in the FA Cup first round on Sunday and, despite losing to Tranmere Rovers in the Johnstone’s Paint Trophy quarter‑final on Tuesday night, have made a formidable start to the League Two season, a transformation in the club’s fortunes since new owners arrived last summer.

Under Stewart Day, a 33-year-old property developer from Burnley, and his colleague, Glenn Thomas, Bury have revamped the Gigg Lane pitch and stocked the manager, David Flitcroft, with new signings including the quality lower-division trio of Ryan Lowe from Tranmere, Nicky Adams from Rotherham United and Danny Mayor from Sheffield Wednesday to become genuine competitors for promotion.

But these happy days are tempered with memories, still raw, of administration in 2001. That crisis of over-borrowing was followed by promises that despite the club always struggling in Manchester’s shadow, directors would never again gamble with Bury’s future. The trauma was precipitated by a £1m loan secured on Gigg Lane at 15% annual interest which the club had argued was excessive and which court documents described as “a true lending of the last resort”.

Yet publicly filed Companies House documents show that since taking over Bury, Day’s company has borrowed exactly the same amount, £1m, also secured on Gigg Lane, but at an exponentially higher interest rate: 10% per month. That is a cumulative annual rate of 138%, meaning that after one year, £1m borrowed in August will, with interest, amount to £2.38m to be repaid. Bury Football Club themselves, formed in 1885 at the dawn of professional football and Football League members for 120 years, are guaranteeing this high-interest £1m loan.

It was taken out by Day’s company, SG Sports Management Limited of Rainbow House, Burnley, on 11 August. By then SG Sports Management had already borrowed £450,000, at the same rate of interest, 10% per month, from a company called, somewhat unpromisingly, Cash4Assets Limited. Day’s company borrowed twice from that company: £200,000 on 14 May, around the time the club signed Lowe, Adams and Mayor, then another £250,000 less than a month later, on 9 June.

Bury FC have guaranteed both those loans; the security is stated in the mortgages to be “a first legal charge … over the freehold property at Bury football ground and stadium, Gigg Lane”.

Just two months later, on 11 August, SG Sports Management borrowed £1m from Goldmann and Sons Limited, a company with a single shareholder, officially classed as “dormant”. The loan included the £450,000 already borrowed from Cash4Assets, plus a further £550,000, to make £1m. Like the previous two, this loan was stated to be for one month, at interest of 7.5% if the whole loan were repaid within a month, then, if it were not, at 10% per month. As the mortgage is still registered against Bury and Gigg Lane, it appears it was not immediately repaid, so interest is running at £100,000 for the first month, then at 10% per month of the outstanding loan; 138% per year.

In October 2013 SG Sports Management took out a mortgage, for unspecified loans, from another company, Datum Finance Ltd, registered in Burnley. The agreement envisages that SG Sports Management would lend money in turn to Bury and Datum would have a mortgage on that loan.

Bury’s most recent accounts are for the year to 31 May 2013, before Day’s ownership, when the club had income of £2.7m but made a £724,688 loss. The principal owner, Brian Fenton, a local man and fan, called time after lending £191,043 to bankroll the club’s losses and the club faced another financial crisis before Day stepped in.

The auditors stated that Bury’s directors considered the club had only “adequate resources to continue in operational existence for the foreseeable future” because Day’s company was making available “up to £2m revolving credit facility”. SG Sports Management had already lent the club £335,000; the accounts do not say what the rate of interest was.

After the 2001 crash Bury were saved from ruin by thousands of donations from people nationwide and even overseas who did not want a venerable English football club to fold. In return donors’ names were affixed to the back of the Gigg Lane seats and the old ground still has them, bearing witness to this generosity.

Stuart Cook, spokesman for a concerned group of small Bury shareholders, said: “We are lifelong fans whose parents and grandparents attended Gigg Lane; we want a successful club but based on sustainable spending. Whilst the improvements of the last year are encouraging, we are worried that the spending appears to be from money borrowed against the ground, at very high cost. There is a lack of transparency and accountability which would give us assurance about this.”

A club statement when Day took over said: “The new board will be bringing in key individuals to assist in bringing new ideas and business models to ensure financial security.”

The Guardian sent detailed questions to Day via the club, principally asking where the £2m credit facility from his company to the club had come from, whether the borrowed money was used to finance the player signings, what the club’s wage bill now is and what plan they have to make sure interest of 10% per month, 138% per year, can be met. He did not reply.