Bank cut your overdraft or called in a loan? Next steps

Why do banks pull facilities?

A letter saying your overdraft will be reduced, a renewal won’t go ahead or a loan must be repaid usually arrives at the worst possible time. The reasons vary: the bank has changed its appetite for your industry, your latest financials show a loss, a covenant has been breached, you’ve fallen behind on tax, or the relationship manager who knew your business has moved on.

Whatever the reason, the effect is the same. Funding you relied on for working capital is going, and you need something to replace it before the deadline in the letter.

What should I do in the first day?

1. Read the letter twice. Note the deadline, the amount and exactly what the bank wants — full repayment, a reduced limit or extra security.
2. Call the bank and ask, politely and directly, for the reasons and for a realistic time to refinance. Get the answer in writing.
3. Check your facility agreement for review clauses and notice periods.
4. Map the cash impact. If the overdraft drops from $200,000 to $50,000, what happens to the next 13 weeks?
5. Talk to your accountant about the bank’s concerns. Sometimes updated financials or a lodgement fix changes the outcome.
6. Start looking for replacement funding now, not in the last week.

Where can replacement funding come from?

Another bank is one option, but bank refinances often take weeks and may be declined for the same reasons. Non-bank lenders work differently: they put more weight on property security and your real-world trading, and less on rigid policy.

What you’re losing	Common replacement	What’s possible
Large term loan secured on property	Non-bank first mortgage refinance	Up to $5m possible within 24–48 hours
Overdraft secured on the home	Property-secured line or second mortgage	$20k to $5m
Unsecured overdraft	Unsecured line of credit	Typically $5,000 to $500,000, sized on turnover
Short deadline, refinance in progress	Urgent bridging loan	Bridges until longer-term funding settles

A non-bank refinance can be a long-term solution or a bridge back to a bank once your financials improve. Either way, it takes the deadline off the table.

Illustrative example: an overdraft that wasn’t renewed

Illustrative only. A Melbourne wholesaler has a $350,000 overdraft secured over the directors’ home. After a loss-making year, the bank declines to renew and gives 60 days to repay. Another bank says it can’t help until next year’s financials are in.

With 45 days left, the directors refinance with a non-bank first mortgage over the home: the existing bank debt is repaid, and a new facility includes $300,000 of working capital. The process from enquiry to settlement is a matter of days once documents are in. The directors plan to return to a bank once two strong half-years are on the books.

What will a new lender ask?

• The bank’s letter and your current facility statements.
• Recent business bank statements and, if available, financial statements.
• An explanation of why the bank made its decision and what has changed.
• Property details and current loan balances if security is offered.
• Your plan: is this a long-term facility or a bridge back to a bank?

Past credit issues and ATO debt are considered case by case. Lenders want an honest picture; surprises late in the process cause delays.

Should I go to another bank first?

It depends on why your bank made its decision. If the reason is specific to that bank — a change in its appetite for your industry, a policy change, a relationship manager leaving — another bank may well say yes, given enough time. If the reason is your results, arrears or ATO debt, other banks will usually see the same thing.

Bank’s reason	Another bank?	Non-bank?
Industry appetite or policy change	Worth trying if time allows	Yes, faster
Loss in latest financials	Often declined until results improve	Yes, assessed on security and exit
ATO debt or arrears	Often declined	Yes, case by case
Covenant breach	Depends	Yes
Very short deadline	Unlikely in time	Yes

A common strategy is to refinance with a non-bank lender now, solve the deadline, and plan a return to a bank in one or two years once results and lodgements support it.

Keep the relationship professional

Even if you’re leaving, a cooperative exit helps. Prompt payout figures, discharge paperwork and statements all come from the old bank, and a smooth handover keeps the refinance inside the deadline.

Don’t wait for the deadline

The best refinances happen with time to spare. Start a 60-second enquiry as soon as the letter lands, and put the bank’s deadline on the form.

There’s no credit check when you first enquire, and we don’t send your details to a pile of lenders — one specialist works out the replacement and calls you. Tell us the facility limit, the deadline and any security you have, accurately, so we can line up the right replacement first time. See what you qualify for.