When your bank won't renew an overdraft or business facility

A different kind of decline

Not every decline is for new money. Sometimes the bank simply decides not to keep lending what it already lends. An overdraft limit is cut at its annual review. A trade facility isn’t renewed. A business loan reaches the end of its term and the bank won’t roll it over.

That can be more frightening than a new loan being refused, because the business has been relying on that money. The key is to treat it as a timeline, not a crisis.

Why banks pull back on existing facilities

• Weaker financials at review, perhaps after a loss year.
• Tax debt that’s appeared since the last review.
• Industry policy changes, where the bank reduces exposure to your sector.
• Security changes, such as a property falling in value or the bank no longer accepting it.
• Covenant breaches, if your facility had financial conditions attached.
• Account conduct, such as an overdraft that’s been fully drawn for months.

Ask the bank which applied. The answer helps you choose a replacement.

First, get clarity on timing

Write to the bank and ask:

1. What exactly is changing, and from when?
2. What notice applies under the facility terms?
3. Can the current facility continue for a set period while you arrange a replacement?
4. Will the bank keep your transaction accounts open?
5. Is there anything you could provide that would change the decision?

Banks are often more flexible when you show you’re actively refinancing. A letter from a lender or broker confirming you’re working on an application can help secure that time.

Replacement options

Need	Possible replacement	Typical basis
Revolving cash-flow buffer	Unsecured line of credit	Turnover and statements
Lump sum to pay out the old facility	Bank statement loan	Recent trading
Larger facility, property available	Private first or second mortgage	Property equity, from $20,000 to $5,000,000
Cash tied up in receivables	Invoice finance	Your customers’ invoices
Short gap before a known payment	Caveat loan	Equity plus a clear exit

Unsecured options typically range from $5,000 to $500,000, sized on turnover and bank statements. If your existing facility is larger or the business has been under pressure, property security may be needed.

If you’re facing a facility review or non-renewal, let us know the details and the timeline you’ve been given.

When the loan term itself has ended

If the problem is a business loan reaching maturity and the bank won’t refinance it, that’s a slightly different situation. See our page on when a refinance is declined, which covers expiring loans, interest-only periods ending and balloon payments.

Avoid these mistakes

• Waiting until the last week. Every option is easier with time.
• Drawing the overdraft to its limit in a panic, which can bring the review forward.
• Ignoring the letters. Silence usually reduces the bank’s goodwill.
• Replacing a cheap facility with an expensive one without checking the cost. Ask for the full cost in dollars, not just a headline figure.

Illustrative example: A packaging wholesaler’s bank reduced its overdraft by half at review after a loss year. The bank agreed to a 90-day transition when the owner explained a replacement was being arranged. An invoice finance facility, secured against the wholesaler’s receivables from major retailers, replaced the lost limit before the deadline.

Preparing for your next facility review

Whether you’re replacing a lost facility or keeping a new one, it helps to understand what reviewers look for. Most annual reviews ask for updated financials, recent statements and your tax position, and then check how the facility has been used.

Reviewers like to see	Reviewers worry about
The facility drawn and repaid in a pattern	A limit fully drawn for months
Financials lodged on time	Late or missing financials
Tax obligations current	A growing ATO balance
Turnover stable or rising	A sharp drop without explanation
No new lenders debiting the account	Short-term advances stacking up

If any of the worries apply, address them before the review if you can, or prepare a short explanation. Lenders are generally more flexible with borrowers who raise issues early than with those who let them surface at review time.

Keeping your transaction banking stable

If your bank has reduced or ended a facility, you may still want to keep your everyday accounts there. That’s usually fine. Before moving anything, check:

• whether any remaining loans with the bank have conditions about where you bank,
• whether merchant facilities or payment terminals are linked to the account,
• whether direct debits, payroll and ATO payments would need to move,
• how a change might affect statement history that a new lender wants to read.

Moving banks in the middle of a refinance can complicate things. In most cases it’s simpler to arrange the replacement first, then decide about transaction banking later.

Quick checklist when a facility is cut

• Get the change, the date and the reason in writing.
• Ask for a transition period while you refinance.
• Work out how much of the facility you actually use.
• Gather twelve months of statements and recent BAS.
• Choose a replacement that fits how you used the old facility.
• Keep the bank informed as the replacement progresses.

Start the replacement conversation now

The earlier you start, the more doors stay open. Our enquiry takes about a minute, there’s no credit check to begin, and your details aren’t sent out to a range of lenders. A real person reads your situation and calls you. Please include the facility type, its current limit and the date you’ve been given, so we can work to your timeline. Tell us what’s changing.