Your bank is calling in the loan or overdraft: what to do before it's due

Many owners have banked with the same institution for decades, so a letter saying the bank won’t renew a facility can feel personal. It usually isn’t. Banks review business facilities regularly, and when a business drifts outside the bank’s appetite — a loss year, ATO debt, a breached ratio — the easiest path for the bank is to ask for its money back. The good news is that a bank stepping back doesn’t mean every lender will.

Why do banks call in business facilities?

The common triggers:

• Facility expiry. Many business loans and overdrafts run for a fixed term and must be renewed. The bank can simply decline.
• Covenant breach. Interest cover, debt-to-earnings or loan-to-value ratios that fall outside the agreed limits.
• A loss year. Financial statements showing a loss can take a business outside the bank’s policy.
• ATO debt. Tax arrears often appear in the financials or in a credit check, and banks tend to be cautious about them.
• A change in bank policy. Industries or loan types fall out of favour.

business.gov.au lists “difficult to get new investors or secure loans” among its warning signs of financial trouble. Sometimes the bank’s letter is simply the first time an owner sees that sign clearly.

How much time do I have?

The letter will state the date the bank wants the facility repaid or reduced. Overdrafts are often repayable on demand, but banks usually give a working period. Treat that date as your deadline and work backwards: a refinance takes time to assess, value and settle.

Step	What to do
This week	Confirm the payout figure and date in writing; ask whether an extension is possible if a refinance is under way
Next week	Gather refinance documents; approach a lender that suits your situation
Before the date	Settle the refinance so the bank is paid out on time

If the bank has already issued a formal default notice, the deadline is set by that notice instead.

What will a private lender look at differently?

A bank typically starts with ratios — serviceability, earnings, covenants. A private lender generally starts with:

1. Security. First mortgages, second mortgages and caveat loans over residential or commercial property, for $20,000 through to $5,000,000.
2. The reason. Why the bank stepped back, and why that doesn’t mean the business is failing.
3. The exit. How this loan will be repaid — a sale, a return to a bank once the next financials are stronger, or a longer-term refinance.

That’s why private lending is so often the bridge between a bank’s “no” and a business’s recovery. Bad credit and ATO debt are considered case by case. If you’d like someone to look at your position, a 60-second enquiry is enough to start, and there’s no credit check involved.

Should I refinance only the bank, or everything?

If the bank is calling in the loan, there’s a fair chance other pressures exist too — ATO arrears, suppliers, an equipment lender. Refinancing the bank alone may leave those in place. A consolidation that pays out the bank and the other debts together can give you one lender, one repayment and a clean slate with the ATO.

For directors who suspect the company is in real difficulty, a refinance can also be part of a documented turnaround plan — see safe harbour and refinancing.

An illustrative example

Illustrative only. A Newcastle engineering firm’s bank declines to renew a business loan and overdraft after a loss year caused by a delayed defence contract. Repayments had never been missed. The directors own the factory. A private first mortgage over the factory pays out the bank and clears a quarter of GST, with a two-year term. When the contract resumes and the next year’s financials show a profit, the firm refinances back to a mainstream lender.

What documents should I start gathering?

• The bank’s letter and the latest facility statements
• Rates notices and any valuation for property you own
• Six months of business bank statements
• The last two years of financials and the latest BAS
• An ATO integrated client account statement
• A short written explanation of what went wrong and what has changed

Our debt rescue document pack has the full checklist.

How should I talk to the bank in the meantime?

Keep the relationship professional, even if the decision stings. A few practical points:

• Ask for the reasons in writing. It helps you explain the situation to a new lender, and it may reveal something fixable.
• Ask for time, specifically. “We’ve started a refinance and expect to settle within six weeks — can you confirm you’ll hold off until then?” is easier for a bank to agree to than a general plea.
• Keep repayments current if you possibly can. A clean conduct record during the transition helps the refinance.
• Don’t move money in ways that breach your facility terms, such as switching deposits out of an account the bank holds security over, without advice.
• Keep copies of everything. If you later need to raise a complaint, a paper trail matters.

If the bank’s letter has already become a formal default notice, the remedy date on that notice takes over as your working deadline.

Could a refinance give you the time the bank won’t?

A bank calling in a loan is a decision about the bank’s appetite, not the end of your business. Refinancing with a lender who’s comfortable with your situation is exactly the kind of remedy that keeps good businesses running.

The enquiry takes about a minute. There’s no credit check at that stage, and your details don’t get sprayed across a list of lenders. A real person reads it and calls you. Please be accurate about the bank balance, the date in the bank’s letter and your property, so we can tell you quickly what’s realistic.

Start your refinance conversation →