Bank Recalled Your Business Loan or Overdraft? What to Do
Business Finance
Facility recall · Your rights · Refinance options
When a bank calls in a business loan or declines to renew an overdraft, the owner usually needs more than a definition. They need to know what happens next, whether payroll and linked accounts will keep working, what the bank can ask for, what documents a refinance needs, and when the problem has moved beyond finance. This guide follows that full path from the demand letter to negotiation, payout, complaint, refinance or enforcement. It is written for company and business borrowers, and it is general information, not legal or financial advice.
Quick Answer
A recall means the bank is demanding repayment of the outstanding facility, usually in full by a stated date. A non-renewal means the bank will not extend the facility at review or expiry, while closing a transaction account or merchant facility is a separate decision that may occur at the same time. Confirm the document, deadline and every affected service, ask the bank for time where appropriate, test a refinance only if the business is solvent, and obtain legal or restructuring advice where repayment is not realistic.
What a recall or an overdraft non-renewal actually means
A recall is the bank calling in the debt. It is a demand to repay the outstanding balance of a facility, usually in full, by a stated date, and it turns a rolling arrangement into a debt that has to be paid or refinanced now. A non-renewal is quieter but lands in a similar place: at a review or an expiry the bank simply declines to extend, so the limit has to be cleared or moved rather than rolled over. And many business overdrafts and lines of credit are, by their own terms, repayable on demand, which means the bank can ask for the balance back without the account being in arrears at all.
It helps to keep the three apart, because the response differs. An overdraft or a line of credit that is repayable on demand can be called under the contract; a term facility is usually recalled after a default or a review event; and a non-renewal is a decision not to offer a new term when the old one ends. The product mechanics of an overdraft, including when it can be reviewed or called in, sit in the business overdraft guide. This page is about the distress trigger: what to do once the demand has landed or the renewal has been refused, and it is general information rather than advice about your specific facility.
Why banks recall or decline to renew a facility
Banks recall or decline to renew a facility for a short list of reasons: a covenant breach, an annual or periodic review built into the facility, arrears or repeated overdrawing, a risk re-rating, a decision to exit a whole sector, the expiry of a term facility, or a change of control the documents treat as a review event. A covenant is simply a promise in the loan documents, and a breach of one is the most common trigger, whether it is a financial covenant such as a loan-to-value or interest-cover ratio, or a non-financial one such as handing in a financial statement late. Which trigger you are facing shapes everything that follows, and a sector exit is not a judgement on you individually.
The reason matters because a technical covenant breach is a very different conversation from genuine financial difficulty. A business that has tripped a reporting covenant but is trading well has a strong case to negotiate or to refinance cleanly; a business that is behind because it cannot pay is in another situation, and there the honest first step is advice, not more borrowing. Where the trigger involves a covenant or a director's guarantee, our note on how a lender reads a covenant and a guarantee gives the background, and the sections below take the demand, your rights and the funding response in turn.
How much notice must a bank give before recalling a business loan?
The answer depends on which event has occurred. Under the 2025 Banking Code of Practice, a subscribing bank must generally give an eligible small business no less than 30 days notice of a payment failure before demanding full repayment or enforcing, unless an exception applies. An overdraft or another on-demand facility may be called without that notice. Separately, where the borrower is not in default and the principal is not scheduled to be fully repaid by regular payments before the term ends, paragraph 93 says the bank will give at least three months notice of a decision not to extend the loan. The Code only binds subscribing banks and uses its own definitions, so the facility documents and facts still govern.
| Situation | General Banking Code position | What the owner must check |
|---|---|---|
| Payment failure under an eligible small-business loan | A subscribing bank generally gives no less than 30 days notice before demanding full repayment or starting enforcement, unless an exception applies. | Whether the Code applies, the stated default, whether it can be remedied, and the exceptions for insolvency or material and immediate risk. |
| Overdraft or another on-demand facility | The bank may not be required to give that notice before requiring repayment. | Whether the facility is expressly repayable on demand, the demand wording, linked defaults and any separate loan being enforced. |
| Loan reaches expiry and the bank will not extend it | Paragraph 93 provides at least three months notice in its stated circumstances where the borrower is not in default and the principal is not scheduled to be fully repaid by regular payments before expiry. | Whether there is an existing default, how repayment was scheduled, the expiry date and whether the bank is a Code subscriber. |
Business-purpose credit warning
Do not assume the consumer default-notice and hardship rules applying to a home or personal loan automatically apply to a genuine business facility. The National Credit Code generally covers specified personal, domestic, household and residential-investment purposes. The prescribed business-purpose declaration warns that signing it may cause the borrower to lose National Credit Code protection. Check the actual purpose, any declaration, the facility documents and the Banking Code position with a lawyer.
If you have received a letter of demand from your bank, identify the document before choosing a response. An ordinary bank demand under the facility documents is not automatically a creditor's statutory demand under the Corporations Act, and an account closure notice is not the same thing as calling in a loan. The wording, form and service date determine which clock is running.
| Document or wording | What it usually indicates | Immediate action |
|---|---|---|
| Notice of default | The bank alleges a payment, covenant or another default and may state a period to remedy it. | Identify the alleged default, the remedy date, what evidence the bank requires and whether the notice follows the documents and applicable Code provisions. |
| Letter of demand, notice of demand, or all monies owing | The bank is calling in the facility and requiring the stated debt to be paid by the stated date. It starts a clock, and it is the step before enforcement rather than enforcement itself. | Confirm the amount, deadline, security and guarantee position, and ask whether enforcement will be held while a proposal is assessed. |
| Repayable on demand | The facility terms allow the bank to request the balance without waiting for an ordinary payment default. | Check the clause, the mechanics needed to comply, any linked defaults and the status of every related facility. |
| Review event, or event of review | Something in the documents, such as a covenant breach or a change of control, lets the bank re-assess the facility now instead of at the scheduled review. A review is not automatically a recall. | Identify the clause the bank relies on, respond to information requests promptly and prepare the position before the review concludes. |
| Decision not to renew or extend | The facility will end at review or expiry and must be cleared, refinanced or otherwise resolved. | Check whether the business is in default, the expiry date, paragraph 93 where applicable, and what the bank needs to consider a short extension. |
| Account or facility closure notice | The bank intends to stop providing a transaction account, card, credit facility or merchant facility. | Confirm exactly which services are ending, when access changes, how credit balances and receipts will be handled, and what alternative banking is needed. |
| Creditor's statutory demand, commonly Form 509H | A formal Corporations Act process served on a company requiring payment, security or a satisfactory compromise within 21 days. | Obtain legal advice immediately. A court application to set it aside also has a strict 21-day period and is not the same as negotiating an ordinary bank demand. |
| Reservation of rights | The bank is preserving its contractual and enforcement rights while discussions continue. | Do not assume a friendly conversation, complaint or refinance application has stopped the deadline. Ask for any standstill in writing. |
Do not confuse the two demands
A bank demand letter is not necessarily a creditor's statutory demand. A statutory demand is a prescribed corporate-insolvency document with a strict 21-day response and court-application period. If the document says "Creditor's Statutory Demand for Payment of Debt", refers to section 459E, or uses Form 509H, send it to a commercial litigation or insolvency lawyer immediately rather than treating it as an ordinary refinance deadline.
Read the demand and your facility documents with a lawyer or your accountant, confirm the exact date and what is actually being demanded, and do not treat any rule of thumb as a guaranteed standstill. Australian case law also indicates that a borrower must have a reasonable opportunity to meet an on-demand call, but that may mean time to arrange the mechanics of payment rather than time to refinance or trade out. The moment it is clear you may not be able to comply is the moment to open two conversations at once: one with the bank's financial-difficulty or recoveries team, and, where the gap is refinanceable, one with a broker. The full Code is published by the Australian Banking Association, the statutory-demand provisions sit in sections 459E and 459G of the Corporations Act 2001, and this is general information, not legal advice.
What to do in the first week after a demand
The first week decides how many options stay open, so treat it as a sequence rather than a scramble: understand the demand, open the bank conversation, test the refinance in parallel, verify anyone new before you sign, and route to free help if the numbers do not work. The order matters more than raw speed, none of it is a promise about any outcome, and your own documents and circumstances govern.
The first week after a demand or a non-renewal
Each of these steps is unpacked in the sections that follow, and the full set of free help lines sits in the help section further down.
What happens next, and how to protect payroll and everyday banking
After a recall, the file usually moves down one of three paths: the bank gives temporary time while a plan is assessed, the debt is refinanced and paid out, or enforcement continues because no workable agreement is reached. At the same time, the business has to protect payroll, supplier payments, customer receipts and access to linked banking. Calling in an overdraft does not automatically close the transaction account, cards or merchant facility, and closing one of those services does not by itself prove the loan has been recalled. Each product has its own terms and notice. AFCA describes the ending of a transaction account, credit facility or merchant facility as an account-closure complaint and generally examines whether sufficient notice was given, generally 14 calendar days, together with the terms, customer circumstances and effect of closure. Ask the bank to confirm every facility and service in writing and do not assume access will continue unchanged.
| Stage | What usually happens | What to prepare or ask for |
|---|---|---|
| Clarify the demand | The bank confirms the amount, the repayment date, the reason for the recall, the security it relies on and the status of linked accounts. | Ask for the demand, current payout figure, facility documents, security documents, statements and the name of the person with authority to discuss a standstill or payout. |
| Negotiate or complain | The financial-difficulty or internal dispute team may assess a proposed standstill, workout, extension or complaint. | Prepare current financials, a cashflow forecast, debtors and creditors, the reason for the problem, the outcome you want and the steps already taken. |
| Test a refinance | A broker and prospective lender test solvency, equity or serviceability, title, security priority, payout or consent and the proposed exit. | Give the full story and the complete document pack at the start. Hiding the demand or the true reason for it normally creates a worse problem later. |
| Coordinate payout or consent | If a refinance is workable, the outgoing bank, incoming lender and lawyers coordinate the payout, discharge, priority or consent and settlement instructions. | Confirm the settlement contact, authorised signatories, account details, any first-mortgagee consent and how residual funds or closed facilities will be handled. |
| If no workable resolution is reached | The bank may continue enforcement under the documents, including security, guarantees or court recovery. | Move immediately to legal and restructuring advice. A refinance application is not a substitute for an insolvency assessment. |
Protect the operating side of the business while the file is moving
A facility recall can affect more than the loan because the overdraft may sit beside a transaction account, cards, merchant settlement, direct debits, payroll files, bank guarantees and other facilities. Request a complete letter of facilities and make an internal list of every automatic payment and receipt before changing anything. Business Victoria recommends listing all business accounts and asking each bank for a letter covering every facility, while Moneysmart explains how to review and stop direct debits. Moving money or redirecting receipts can have legal and insolvency consequences, so get advice before taking steps intended to put funds beyond a secured creditor.
| Dependency | What to ask the bank | What to check inside the business |
|---|---|---|
| Transaction account and overdraft | Is the transaction account still open, has the credit limit been removed or restricted, and can the bank combine or set off funds? | Check the cleared balance, pending transactions and every payment due before the next expected receipts. |
| Payroll and direct debits | Which scheduled payments will still be honoured, and from which available funds? | List payroll, tax, super, rent, utilities and critical suppliers. Change instructions only after a replacement account is operational and the legal position is understood. |
| Merchant settlement and customer receipts | Will card settlements and payment-gateway receipts continue, and to which account? | Confirm where customer money lands before changing invoice details or asking customers to redirect payments. |
| Cards, BPAY and online banking | Will cards, user authorities, BPAY files and online access remain active? | Identify every user, card, approval workflow and payment method the business needs to keep trading. |
| Other loans, leases and bank guarantees | Does the recall affect another facility through an all-monies, cross-default or review clause? | Request a complete letter of facilities and have the linked documents and security position reviewed. |
A subscribing bank may also have rights to combine or set off accounts. Paragraph 192 of the 2025 Banking Code says that if a bank combines accounts, including using available funds in one account to repay a debt owed to it, it must promptly tell the customer. Whether a particular business account can be set off depends on the account ownership, facility terms, security and insolvency law, so ask the bank in writing and get legal advice before moving or redirecting funds (2025 Banking Code of Practice; not legal advice).
Your rights and protections as a small business
A small business facing a recall or a non-renewal has six main protections: the Banking Code notice period, the Code's financial-difficulty process, an AFCA complaint hold, AFCA's small-business jurisdiction, unfair contract terms law, and the Australian Small Business and Family Enterprise Ombudsman. None of these guarantees a renewal, and none replaces legal advice, but together they shape what a bank must do and where you can push back. The table sets them out with the same caution against every row: coverage depends on the lender and your circumstances, and this is general information, not legal advice.
| Protection | What it does | Who it covers | Key limitation |
|---|---|---|---|
| Banking Code notice | Requires a subscribing bank to give no less than 30 days notice of a payment failure before demanding full repayment or enforcing. | Small-business customers of banks that subscribe to the Code. | Subscribing banks only; the Code defines small business; stated exceptions apply. |
| Banking Code financial difficulty | Lets a small business ask a subscribing bank for assistance, and earlier contact usually means more options. | Small-business customers of subscribing banks. | Assistance is discretionary and case by case; small businesses lack the statutory hardship rights individuals have. |
| AFCA complaint hold | Lodging an eligible complaint can require an AFCA member firm to pause enforcement or recovery while it is considered. | Customers of AFCA member firms, including many small businesses. | Not automatic in every case; strongest for default-judgment and financial-difficulty complaints. |
| AFCA jurisdiction | AFCA can consider a small-business complaint and assess whether the firm acted fairly and within its obligations. | Small business, defined by AFCA as fewer than 100 employees, against member firms. | AFCA will not usually override a legitimate commercial decision, such as not renewing; check membership. |
| Unfair contract terms | An unfair term in a standard-form small-business contract can be declared unenforceable. | Standard-form small-business contracts, which can include some loan contracts. | A court decides if a term is unfair; coverage depends on the contract; penalties apply for using unfair terms. |
| ASBFEO | The Australian Small Business and Family Enterprise Ombudsman offers guidance and help with disputes, including with a bank. | Small businesses and family enterprises. | Guidance and referral, not a regulator that can force a lending decision. |
The detail sits with each body, and it is worth going to the source: the Banking Code of Practice, AFCA on small business, the ASIC guidance on commercial-loan disputes, and the Australian Small Business and Family Enterprise Ombudsman. Using them early, while the facility is still live, tends to open more than using them after enforcement has started, and none of it substitutes for acting on the facility itself: where the gap is timing and the business is solvent, the working capital and refinance options set out below are the practical next step.
If the facility is secured: receivers, guarantees and your home
A secured facility raises the stakes: if the debt is not paid, the bank can enforce its security, appoint a receiver, and call any personal guarantees, and the timeline can move faster than the demand letter alone suggests. A bank's security over business assets is typically a general security agreement, a charge over all or most of the company's assets, registered on the Personal Property Securities Register, and priority between financiers is worked out there; the rules are technical, and this is not legal advice. If the bank enforces that security, it can appoint a receiver: an external controller who takes control of the secured assets, usually to sell them. A receiver, as a controller exercising a power of sale, has a statutory duty to take reasonable care to sell the property for not less than its market value, or, where it has no market value, for the best price reasonably obtainable in the circumstances (Corporations Act 2001, section 420A; the duty is on the controller and outcomes depend on the assets and circumstances; not legal advice).
Personal guarantees are the part that reaches past the company. If directors have guaranteed the facility, the guarantee can be called when the company does not pay, and that can put personal assets, including the family home, at risk; if a guarantee cannot be met, it can lead to personal insolvency. For guarantees covered by Part B6 of the 2025 Banking Code, a subscribing bank has specific notification and enforcement processes. These include sending certain guarantors a copy of a formal demand or default notice, generally enforcing borrower security before security given by the guarantor, and discussing options where a guarantor is in financial difficulty after a demand. Important exclusions and exceptions apply, including for some director and commercial-asset-finance guarantors, so the Code summary is not a substitute for reading the guarantee.
| Guarantee question | General position | What to do now |
|---|---|---|
| Can the bank make a demand on the guarantor? | Potentially, if the borrower has defaulted and the guarantee covers the liability, subject to the guarantee and any applicable Banking Code protections. | Obtain the signed guarantee, all variations, the borrower demand and any separate guarantor demand, and have a lawyer identify the amount and trigger. |
| Must the bank enforce company security first? | For guarantees covered by the relevant Banking Code provisions, the bank generally enforces borrower security before security given by the guarantor, but stated exceptions can apply. | Check whether Part B6 covers this guarantor, what borrower security exists and whether the bank relies on an exception. |
| Is the family home automatically lost? | No. It may be exposed depending on ownership, mortgages, guarantees, security and the enforcement path, but a demand does not itself transfer or sell the property. | Get personal legal advice before signing a standstill, consent, variation or new security, and confirm whether the home is already mortgaged to the bank. |
| Can the guarantor ask for assistance? | A guarantor in financial difficulty after a demand can contact a subscribing bank to discuss options under paragraph 127 where that Code provision applies. | Contact the bank promptly, provide a realistic personal financial position and use an independent lawyer or financial counsellor. |
Our guide to director guarantees after business borrowing covers the guarantee itself in more detail. Where enforcement over property is already in train, the guide to refinancing out of mortgagee in possession covers that narrower situation, and a second mortgage is one way equity behind the bank is sometimes released. Get legal advice before a guarantee is enforced, because the guarantee, the security and the guarantor category govern.
Refinancing a called or non-renewed facility
A called or non-renewed facility is often refinanceable, where the business is solvent and has real equity behind the existing bank or demonstrable serviceability. Rather than losing the facility, a business in that position can frequently move it to a non-bank lender, and the shape depends on the file. It might be a second mortgage sitting behind the remaining or departing bank, arranged with a payout or a consent path; it might be private lending or caveat-secured lending where speed is the constraint; or it might be a working capital facility that simply replaces the overdraft. Business-purpose credit generally sits outside the National Credit Act, which is one practical reason a non-bank can sometimes act on a recalled facility faster than a bank can (ASIC INFO 101; the predominant-purpose test applies; not legal or financial advice).
One warning belongs right here, before the options are weighed. Refinancing to pay one lender while the company is otherwise insolvent can make the position worse, not better, and it can raise insolvent-trading risk for directors. New borrowing is a fix only when the business is genuinely solvent and the new facility has a real exit; solvency honesty comes first, and the risks section below is the deliberate counterweight to this one. With that said, the two columns below are what actually separates a file that refinances cleanly from one that stalls.
What makes a recalled file refinanceable
- Real, evidenced equity behind the existing bank, or demonstrable serviceability
- A known payout figure and a first-mortgagee or departing-bank consent path understood early
- Clean title, without competing caveats
- A genuine, explainable reason for the recall, such as a covenant technicality rather than repeated arrears
- A true business-purpose declaration, and a credible exit: a refinance, a contracted sale, or a receivable
What tends to stall or kill it
- Waiting until the demand has nearly expired before seeking help
- Equity that exists on paper, but not after the bank payout and costs
- A business that is genuinely insolvent, which is a restructuring conversation, not a lending one
- A recall driven by conduct the next lender will also see
From our broking files, general and without figures
What we see on recalled and non-renewed files, kept to direction rather than numbers, because a distress-adjacent loan is exactly where an invented figure does damage.
- The pattern that costs the most options: the demand sits in a drawer while the owner hopes the review will resolve itself, and the file reaches us close to the deadline with no payout figure and no consent path started.
- The pattern that resolves cleanest: the owner treats the recall as a project from day one, gets the payout figure and the title position early, tells the whole story up front including the real reason for the recall, and runs the bank conversation and the refinance in parallel.
- The filter we apply before anything else: is this a timing gap or a solvency gap. A timing gap with real equity or serviceability is a lending conversation; a solvency gap is a restructuring conversation, and pushing new borrowing at it makes things worse, not better.
General information only, from broking experience, and not financial advice. This is not an offer, an approval, or a likelihood of approval; every application is assessed on its own facts, its security, its exit and lender policy at the time. New borrowing is not a fix for insolvency. Speak to a qualified broker, and to your lawyer or a registered practitioner.
What documents should be ready for a recalled-facility refinance?
A lender can only assess a recalled facility properly when the demand, the existing debt, the operating position, the security and the exit are visible together. The exact request varies by lender and structure, but a complete first submission normally needs the categories below. This is also the information the bank may ask for when considering financial-difficulty assistance; the Australian Banking Association lists business plans, cashflow, debtors, creditors and tax information among the material a bank may request.
| Document group | What to include | Why it matters |
|---|---|---|
| The recall and existing debt | The demand or non-renewal letter, facility agreement, recent statements, current payout figure and a complete letter of facilities. | Shows exactly what must be repaid, by when, what else is linked and whether consent or discharge is required. |
| Business performance | Current financial statements, management accounts, BAS where relevant, bank statements, cashflow forecast, debtors and creditors. | Separates a temporary timing gap from a solvency or ongoing serviceability problem. |
| Security and priority | Property details, mortgage statements, rates notices, leases, any valuations, PPSR information and details of caveats or other secured creditors. | Lets the lender and lawyers understand real equity, title, ranking, payout and consent. |
| Entities and guarantees | Company, trust and identity documents, ownership details, authorised signatories and copies of guarantees or indemnities. | Confirms who is borrowing, who owns the security and who may be personally exposed. |
| Purpose and exit | A plain explanation of why the bank recalled or did not renew, the proposed use of funds and evidence of the exit, such as a refinance plan, contracted sale or receivable. | A credible explanation and evidenced exit are more useful than a polished application that avoids the real issue. |
The mechanics of each route live on their own pages, so this guide points to them rather than repeating them. The business-loan refinance after default guide deals with the replacement-lender assessment once a default or demand exists. The second mortgage guide covers consent and priority behind a bank, and the private lending guide covers how a private lender assesses a deadline-driven file. Two shorter reads are worth it if a bank has just moved: private lending after a bank declines, and choosing between a private lender and a second mortgage. The two scenarios below show the shape of a clean file, kept deliberately outcome-vague and business-purpose.
Speed and cost, in plain terms
Speed and cost on a non-bank refinance come down to the file, and it is more useful to understand the drivers than to chase a number, so this section deliberately carries no rates, no fees and no day counts. What follows is the shape of the costs and the things that make a deal move, all of which depend on your circumstances and the lender, and none of which is a promise.
| Cost or speed factor | What it is | What drives it |
|---|---|---|
| Interest basis | How interest is charged on a short-term, property-secured facility. | The lender, the security and the risk on the file; always confirm the full rate and terms in writing. |
| Establishment and line fees | The up-front and ongoing fees to set up and hold the facility. | The lender and the structure; ask for the total cost, not just the headline rate. |
| Valuation, legal and settlement | The cost of valuing the security and documenting the loan. | Third-party valuers and lawyers, on their own fees. |
| Discharge and exit | The cost of paying the facility out when the exit happens. | The facility terms and the exit path; a clean exit keeps this predictable. |
| Speed: title and security | How quickly the security can be assessed and registered. | Clean title, no competing caveats, and an understood payout or consent path. |
| Speed: evidence and readiness | How ready the file is when it reaches the lender. | Evidenced equity or serviceability, entity documents ready to sign, and the demand disclosed up front. |
The single biggest driver of speed is not the lender, it is how ready the file is when it arrives, which is the same lesson the finance sections keep returning to. If you want the underlying concepts in plain terms, the private lending and exit strategy entries are a good starting point.
Risks, protections and who to call for help
Business borrowing carries the lowest level of legal protection, so the checks matter more, not less. Commercial and business loans have the lowest level of legal protection for borrowers under the law, and commercial-only lenders need not hold a credit licence or belong to AFCA, although the ASIC Act still bans unconscionable conduct, misleading conduct, and unfair terms in standard-form small-business contracts (ASIC INFO 207, as at April 2024). ASIC has also flagged private credit as an area of active surveillance and scrutiny, which is another reason to check who you are dealing with (ASIC REP 820, a surveillance report as at November 2025; qualitative context only).
| Problem to solve | Appropriate first contact | What that person or organisation can address |
|---|---|---|
| Need time, reduced payments or a repayment arrangement | The bank's financial-difficulty or recoveries team | A standstill, short extension, payment arrangement, orderly sale period or another case-by-case workout. |
| Believe the bank acted incorrectly or unfairly | The bank's internal dispute resolution team, then AFCA where eligible | The complaint, relevant Code or account-closure obligations and whether recovery should be paused under AFCA's rules. |
| Need to replace the facility | A commercial finance broker and prospective replacement lender | Whether the business is refinanceable, the document pack, payout, security, lender consent and exit. |
| Guarantee, receiver, property or enforcement risk | A banking, commercial litigation or insolvency lawyer | The demand's validity, security priority, guarantee exposure, statutory-demand deadlines and court or enforcement options. |
| Unsure whether the company is solvent | A registered liquidator or restructuring practitioner | Solvency, safe-harbour considerations, small-business restructuring and formal insolvency paths. |
| Need free small-business financial counselling | The Small Business Debt Helpline | Independent help understanding the debts, cashflow and available support before making commitments. |
| Need broader assistance with a small-business dispute | The Australian Small Business and Family Enterprise Ombudsman | Information, referral and assistance with eligible small-business disputes, including disputes involving finance providers. |
Where to get help
If the pressure is broader than this one facility, free and independent help exists, and reaching out early usually opens more doors than waiting. Talk to your bank's financial-difficulty team as soon as you can, and get your own advice in parallel.
The Small Business Debt Helpline on 1800 413 828 gives free, independent and confidential financial counselling to people in small business (sbdh.org.au). For personal debt, the National Debt Helpline on 1800 007 007 does the same. If the business may not be able to pay its debts as they fall due, a conversation with a registered liquidator or restructuring practitioner should come before any new borrowing, and Moneysmart explains how free financial counselling works.
There is a harder line under all of this, and it is the honest counterweight to "just refinance it". Directors have a duty to prevent insolvent trading: they should not let the company keep incurring debts, including new borrowing, if it is insolvent or would become insolvent by doing so (Corporations Act 2001, section 588G; ASIC INFO 42, insolvency for directors; early advice is ASIC's stated position, and safe harbour may apply; not legal advice). If the business genuinely cannot pay its debts as they fall due, the first conversation is with a registered liquidator or restructuring practitioner, not a lender.
Checking a lender is a strength, not a weakness. Before you sign anything, look the lender up on the ASIC registers and on ABN Lookup, ask directly whether they are an AFCA member, read the full cost of the loan and its default terms, and take the documents to your own lawyer; if you are weighing a non-bank facility, our private lending page sets out how a straight facility is structured. A lender worth using expects all of it, and none of it slows a genuine deal; it only filters out the ones you would have regretted.
If refinancing is not the answer: negotiation and the paths that are not finance
Refinancing is not always the right answer, and a good broker will say so. Where the business cannot service new debt, the honest options are not finance at all. You can ask the bank to agree a standstill or a workout under the Banking Code financial-difficulty process; you can consider safe harbour, which can protect directors who pursue a course reasonably likely to lead to a better outcome than immediate administration; and there are formal paths, such as small business restructuring and voluntary administration, designed to give a viable business room to reorganise (ASIC INFO 42, insolvency for directors, read for the current detail; eligibility criteria apply; not legal advice).
If a creditor escalates while this is going on, the pressure can take specific forms, each with its own clock. A company that does not pay a due debt can be served with a statutory demand, which runs on a strict timetable of its own; unpaid tax can bring a director penalty notice or other ATO recovery action, and our guide to ATO tax debt and finance covers that path. The common thread is that the earlier you get advice, the more of these stay options rather than emergencies. For the wider set of business-finance situations, the business owners finance hub is the map.
A recall calls in a facility, a non-renewal declines to extend one, an account closure ends a banking service, and a creditor's statutory demand starts a separate corporate-insolvency process. The notice depends on the event: a subscribing bank generally gives an eligible small business no less than 30 days notice of a payment failure, an on-demand overdraft may be called without that notice, and paragraph 93 provides at least three months notice for a qualifying non-renewal. Where the business is solvent and has equity or serviceability, a called or non-renewed facility may be refinanceable, but payroll, receipts, linked banking, guarantees and any statutory deadline must be protected in parallel. The files that resolve well share one shape: the document identified correctly, advice taken early, the reason for the recall understood honestly, operating dependencies mapped, the document pack ready, and the bank and a broker engaged at the same time.
Key takeaway: identify the document and deadline first, confirm every linked service and guarantee, separate a timing gap from a solvency gap, and run the bank, legal and refinance workstreams in parallel.Frequently Asked Questions
A recall is the bank calling in the debt: a demand to repay the outstanding balance of the facility, usually in full, by a stated date. It does not by itself end your business, but it converts a rolling facility into a debt that has to be paid or refinanced now. Many overdrafts and lines of credit are also repayable on demand by their own terms, so a recall is not always tied to arrears. The practical responses are to negotiate with the bank, to refinance to a non-bank if the business is solvent and has equity or serviceability, or to get advice early where it cannot be repaid. This is general information, not legal or financial advice.
Yes, an overdraft or another on-demand facility can be called under its terms even when the account is not in payment default. Paragraph 85 of the 2025 Banking Code says the Code notice requirement may not apply to an overdraft or on-demand facility. The exact position comes from your documents, the bank's Code status and the circumstances, so read the demand with a lawyer rather than assuming you have 30 days. This is general information, not legal advice.
The common reasons are a covenant breach, an annual or periodic review, arrears or repeated overdrawing, a risk re-rating, the bank exiting a sector, the expiry of a term facility, or a change of control. A non-renewal is often not a judgement on you personally: banks sometimes withdraw from a whole industry. The reason matters because a technical breach, such as a late financial statement, is a very different conversation from genuine financial difficulty, and it changes whether the cleaner path is to negotiate, to refinance, or to get restructuring advice.
For a subscribing bank and an eligible small business, paragraph 82 of the 2025 Banking Code generally provides no less than 30 days notice of a payment failure before full demand or enforcement, unless an exception applies. Paragraph 85 says an overdraft or another on-demand facility may be called without that notice. Paragraph 93 separately provides at least three months notice in its stated circumstances where the borrower is not in default and the bank decides not to extend a loan whose principal is not scheduled to be fully repaid by regular payments before expiry. The bank's Code status, the borrower and facility definitions, the documents and the facts govern, so obtain legal advice about the notice you received.
You can ask a subscribing bank for a standstill, an extension of the demand deadline, a short renewal for an orderly refinance, an interest-only or reduced-payment period, or consent to a second-ranking refinance behind the bank. Any assistance is discretionary and assessed case by case under the Banking Code's financial-difficulty process. A bank is more likely to engage when a realistic plan sits behind the request, which is why the ask lands better with your accountant's numbers attached and, where the plan is a refinance, a broker's proposal alongside it. Earlier contact usually means more options, none of it is an entitlement, and this is general information, not financial advice.
It is the written demand a lender uses to call in a facility. It states an amount and a timeframe, and it may follow a default notice or a notice that a covenant has been breached. A demand letter is a serious document with its own deadline, so the first step is to confirm with a lawyer exactly what is being demanded and by when, and the second is to work out, honestly, whether the gap is timing, which finance can sometimes bridge, or solvency, which it cannot. This is general information, not legal advice.
Ignoring it usually narrows your options rather than buying time. The demand keeps running to its stated date, and once it expires the bank can move to enforcement under the documents: calling personal guarantees, appointing a receiver over secured assets, or starting court recovery. Engaging early, with the bank's financial-difficulty team, with your own lawyer, and with a free financial counsellor if you need one, tends to keep negotiation, refinance and restructuring paths open that expiry can close. This is general information, not legal advice.
An eligible complaint to the Australian Financial Complaints Authority can require an AFCA member firm to hold enforcement or recovery while the complaint is considered, although the pause is not automatic in every case and is strongest for default-judgment and financial-difficulty complaints. AFCA will not usually override a bank's legitimate commercial decision, such as a decision not to renew a facility, and it can only consider complaints against firms that are actually members. Check membership, and treat the pause as case by case rather than automatic. AFCA rules govern and can change; this is not legal advice.
You can dispute a bank demand through the bank's internal dispute resolution process and, where the complaint is eligible, AFCA. Start in writing if you believe the demand is wrong in amount, premature under your documents, or unfairly made, and ask at the same time for the bank's reasons and copies of the facility documents it relies on. Be aware that Australian courts have held an overstated amount does not by itself invalidate a demand, so do not ignore a demand just because the figure looks wrong. If the bank is an AFCA member and the complaint is eligible, escalating to AFCA can pause enforcement while the complaint is considered, although AFCA will not usually override a legitimate commercial decision such as a non-renewal. An unfair term in a standard-form small-business contract can also be challenged, and a court decides that question. Whether the demand itself is validly made under your facility documents is a question for your lawyer, and the Australian Small Business and Family Enterprise Ombudsman can help with a dispute with a bank. This is general information, not legal advice.
Often, where the business is solvent and the file is ready. A business with real equity behind the existing bank, or demonstrable serviceability, can frequently move a called or non-renewed facility to a non-bank lender through a second mortgage, private lending, or a working capital facility that replaces the overdraft. Business-purpose credit generally sits outside the National Credit Act, which is one reason a non-bank can sometimes move faster than a bank. What it turns on is equity or serviceability, a known payout or consent path, clean title and a credible exit. Refinancing to pay one lender while the company is otherwise insolvent can make things worse, so solvency comes first. This is general information, not financial advice.
If the facility is secured, usually by a general security agreement registered on the Personal Property Securities Register, the bank can enforce that security if the debt is not paid. It can appoint a receiver, who as a controller has a statutory duty to take reasonable care to sell for not less than market value, or the best price reasonably obtainable in the circumstances. Personal guarantees can also be called, which can put a director's own assets, including the family home, at risk, and if a guarantee cannot be met it can lead to personal insolvency. Get legal advice before the security is enforced; outcomes depend on your documents and circumstances.
The home can be at risk, but a demand does not automatically transfer or sell it. Exposure depends on the guarantee, ownership, mortgages, security and the enforcement path. For some guarantees covered by Part B6 of the 2025 Banking Code, the subscribing bank generally enforces borrower security before security given by the guarantor, subject to exclusions and exceptions, and it must discuss options with a guarantor in financial difficulty after a demand where paragraph 127 applies. Obtain the signed guarantee and independent legal advice before agreeing to a variation, standstill or new security. The Small Business Debt Helpline on 1800 413 828 also offers free, confidential financial counselling.
A facility recall and an account closure are separate decisions, although they can occur together. Calling in an overdraft does not automatically close the transaction account, cards or merchant facility. Ask for written confirmation of every service, the closure date, access to credit balances, pending merchant settlements, direct debits and online banking. AFCA generally considers whether sufficient notice was given, generally 14 calendar days, together with the terms, customer circumstances and impact of closure. Prepare alternative banking early, but obtain legal and accounting advice before moving money or redirecting receipts.
A bank may have contractual rights to combine or set off accounts, including using available funds in one account to reduce a debt owed to it. Paragraph 192 of the 2025 Banking Code says a subscribing bank must promptly tell you if it does so. Whether the bank can set off a particular business account depends on account ownership, the facility terms, security and insolvency law, so do not move or redirect funds to defeat a creditor; ask the bank in writing and get legal advice.
The core pack is the demand or non-renewal letter, facility and security documents, current payout and letter of facilities, recent statements, current financials and management information, cashflow forecast, debtors and creditors, security and property documents, entity and identity documents, guarantees, and evidence of the proposed exit. The exact request varies by lender, but giving the complete story and document pack at the start is usually more valuable than sending a partial application quickly.
It can, but a non-renewal by itself is not a default listing: declining to extend at expiry is a commercial decision, and it is missed payments, unpaid demands and court judgments that lead to listings. Where a default is recorded, credit reporting bodies list events for defined periods: a default listing generally stays for five years, a court judgment for five years, and repayment history for two years, with financial hardship information kept for a shorter period (Office of the Australian Information Commissioner; verify the current periods with OAIC, as they can change). Not every recall becomes a listed default, and the rules are technical, so check your own position with a lawyer or a free financial counsellor rather than assuming the worst or the best.
Free, independent help exists, and using it early usually opens more options. The Small Business Debt Helpline on 1800 413 828 gives free financial counselling to people in small business, and the National Debt Helpline on 1800 007 007 does the same for personal debt. Talk to your bank's financial-difficulty team early, and if the business may not be able to pay its debts as they fall due, a registered liquidator or restructuring practitioner, and your own lawyer, should be part of the conversation before any new borrowing. This is general information, not legal or financial advice.
No. A bank demand letter usually calls in a loan under the facility documents. A creditor's statutory demand is a prescribed Corporations Act document served on a company, commonly using Form 509H, which requires payment, security or a satisfactory compromise within 21 days. An application to set it aside must also be made within that strict period. If the document refers to section 459E, Form 509H or "Creditor's Statutory Demand for Payment of Debt", obtain legal advice immediately rather than treating it as an ordinary refinance deadline.
Many genuine business-purpose loans sit outside the National Credit Code because the Code generally applies to specified personal, domestic, household and residential-investment purposes. The prescribed business-purpose declaration warns that signing it may cause the borrower to lose National Credit Code protection. The actual use of the credit and whether a declaration is effective can matter, so do not assume either that the Code applies or that it does not. Check the purpose, declaration and facility documents with a lawyer.
What sources support this guide?
This guide is built on primary and government sources: the 2025 Banking Code for payment-default notice, on-demand facilities, qualifying non-renewal, guarantees and set-off; AFCA for account-closure and small-business complaint treatment; the National Credit Code and regulations for business-purpose credit; the Corporations Act for statutory demands, receivers and insolvent-trading duties; and government guidance on refinancing, account mapping, direct debits and help routing. Each regulatory point is linked beside the relevant answer.
| Source | What it supports | As at |
|---|---|---|
| ABA 2025 Banking Code of Practice, paragraphs 82 to 93 | Payment-default notice, exceptions, on-demand overdrafts, other defaults and the qualifying three-month non-renewal notice | 2025 |
| ABA 2025 Banking Code, Part B6 | Information to guarantors, borrower-security-first processes, stated exceptions and financial-difficulty discussions after a guarantor demand | 2025 |
| ABA 2025 Banking Code, paragraphs 192 to 194 | Combining or setting off accounts and the obligation to tell the customer promptly | 2025 |
| AFCA account-closure factsheet | The distinction between closing a transaction account, credit facility or merchant facility, and AFCA's general 14-calendar-day notice benchmark | 2026 |
| AFCA small-business and financial-difficulty guidance | Complaint eligibility, financial-difficulty complaints and the circumstances in which enforcement or recovery may be held | 2024 to 2026 |
| National Credit Code and regulation 68 | The purposes covered by the Code and the prescribed warning in a business-purpose declaration | Current |
| Corporations Act 2001, sections 459E and 459G | The creditor's statutory demand process and the strict 21-day compliance and set-aside application periods | Current |
| Corporations Act 2001, sections 420A and 588G | The receiver's market-value duty and the director's duty to prevent insolvent trading | Current |
| ASIC INFO 101, INFO 207 and REP 820 | Commercial-credit regulation, protections applying to business lending and private-credit surveillance context | 2020 to 2025 |
| Bunbury Foods v National Bank of Australasia, via NSW Law Reform Commission Report 105 | The reasonable-opportunity-to-comply point on an on-demand call and the treatment of an overstated demand | 1984, report 2004 |
| Business Victoria and Moneysmart | Mapping every account and facility, requesting a letter of facilities and reviewing direct debits during a banking change | 2026 |
| Small Business Debt Helpline, National Debt Helpline and ASBFEO | Free financial counselling, personal-debt support and broader small-business dispute assistance | 2026 |
Regulatory positions and Code obligations are summarised, not reproduced in full, and none of this is legal, tax or financial advice. The Banking Code, AFCA's rules, legislation and guidance can change, and your own facility documents govern. Confirm the current position with your lawyer or a registered practitioner before acting. For the wider set of business-finance guides, the business owners finance hub collects them in one place.
FBAA Accredited
