An unsecured line of credit when the bank won't renew

A buffer, not a lump sum

Many businesses don’t need one big loan. They need a buffer: something to cover wages before a large invoice is paid, stock before a busy season, or a tax bill that lands at an awkward time. That’s what a line of credit is for.

You’re approved for a limit. You draw what you need, repay when cash comes in, and draw again later. You generally pay for what you use, plus any facility fees.

When a line of credit fits after a decline

• Your bank cut or cancelled your overdraft. A line of credit can replace it. See when a facility isn’t renewed.
• Your bank declined a working-capital loan because of old financials, but your current trading is strong.
• Your income is lumpy, with predictable gaps between payments.
• You want a safety net without taking on a lump sum you might not need.

What lenders assess

Area	What they look at
Turnover	Average monthly deposits over recent months
Consistency	Steady income, not one-off spikes
Conduct	Dishonours, overdrawn days, existing debts
Tax	Regular ATO payments or a kept payment plan
Credit	Business and director files, case by case
Time trading	Often at least six to twelve months

Limits are typically within $5,000 to $500,000, sized on turnover and conduct. Directors usually provide personal guarantees.

Using a line of credit well

1. Use it for timing gaps, not ongoing losses.
2. Repay as cash arrives, so the limit is available again.
3. Watch for the “always drawn” trap. A facility that sits fully drawn for months suggests a deeper problem and can affect its renewal.
4. Know the fees, including any line or establishment fees.
5. Track it alongside your cash-flow forecast.

If you’re not sure whether a line of credit or a lump-sum loan suits you better, send us a short enquiry and we’ll talk it through.

Alternatives to consider

• Bank statement loans if you need a lump sum with fixed repayments.
• Invoice finance if your cash is tied up in invoices to business customers.
• Property-secured facilities if you need a larger limit and have equity.

Keep your statements ready for review

Lines of credit are often reviewed periodically. Keeping your statements clean, your tax obligations up to date and the facility actively used and repaid helps it stay in place. Our page on bank statement red flags lists the patterns reviewers watch.

Illustrative example: An events-hire business had its bank overdraft halved after a quiet winter. A non-bank lender assessed twelve months of deposits, which showed a strong spring and summer, and approved an unsecured line of credit. The owner drew on it before the busy season to buy stock and repaid it from summer bookings.

Line of credit or lump-sum loan: how to choose

Both can help after a bank decline, but they solve different problems. A line of credit is for timing. A lump-sum loan is for a defined cost.

Question	Points to a line of credit	Points to a lump-sum loan
Is the need repeating?	Yes, every month or season	No, it’s a one-off
Do you know the exact amount?	Not precisely; it varies	Yes, there’s a quote or invoice
Will you repay quickly?	Yes, as customer payments arrive	Over a set term
Is the purpose an asset or project?	Rarely	Often
Do you want to avoid paying for unused money?	Yes	Less important

If you’re unsure, think about the last twelve months. If you’ve repeatedly been short for a few weeks and then caught up, a line of credit is probably the better tool. If you need a one-time injection to buy, fit out or clear a debt, a lump sum usually fits better.

How to size the limit sensibly

A limit that’s too small doesn’t solve the problem. A limit that’s too large can tempt you to use it for ongoing losses, and may cost line fees for money you never draw.

A practical approach:

1. Map your cash low points. Look back over a year of statements and find the deepest dips.
2. Add a margin. Allow for a slower-than-usual month or a late customer.
3. Check the repayments fit. If the full limit were drawn, could you repay it within a reasonable period from normal trading?
4. Ask for less than the maximum offered if a smaller limit covers your real gaps.

Lenders will size the limit on turnover and conduct anyway, but arriving with a reasoned figure shows you understand your own cash flow, which reassures them.

Quick checklist before applying

• Download twelve months of business bank statements.
• Mark your cash low points and their causes.
• List every existing lender and repayment.
• Confirm your ATO position, including any payment plan.
• Decide the limit you actually need, with a margin.
• Ask about every fee, including line fees on undrawn amounts.

A steady buffer for an uneven business

A well-sized line of credit can take the stress out of timing gaps. Sending us an enquiry doesn’t trigger a credit check, and we don’t share your details with a crowd of lenders. A real person reads your situation and calls you. Please let us know your average monthly turnover and what happened with any earlier facility, so we can size the limit sensibly. See if you qualify.