Missed a line of credit or overdraft repayment? What happens next, and what to do

A missed repayment on a business line of credit or overdraft usually brings fees and contact from the lender, not instant cancellation. What follows depends on your facility terms and on what you do in the next couple of days. Call the lender first, explain what caused it, pay what you can and offer a short, realistic catch-up plan.

Most owners who miss a payment on a revolving facility aren’t reckless. A big customer paid late, the BAS landed in the same week as the pay run, or a direct debit hit an account that was a few hundred dollars short. The facility is meant to absorb bumps like these, and it can, as long as the bump doesn’t turn into silence.

What usually happens in the first few days?

Every lender and every facility is different, but the early pattern is broadly similar:

• The payment is dishonoured or the account goes into arrears. On an overdraft, this often looks like the account sitting above its limit. On a line of credit, it’s a minimum repayment that didn’t clear.
• Fees are charged. Dishonour, overlimit or late fees, depending on your agreement.
• The lender makes contact. An automated message first, then often a call or letter from a collections or relationship team.
• The facility may be paused. Some lenders stop further draws until the account is back within terms.

None of this is the end of the facility. It’s the lender checking whether this is a hiccup or the start of a pattern. Your response is what tells them which.

How can a missed repayment affect your credit history?

This depends on who’s liable for the facility and what type of credit it is.

The OAIC explains that consumer credit reports can include repayment history information, showing whether payments were made on time, and that a default of $150 or more can be listed once a payment is at least 60 days overdue. Financial hardship arrangements are also reported against repayment history.

Credit reporting law focuses on consumer credit, so a company’s business facility doesn’t usually sit on your personal report in the same way. But there are several ways a business miss can still matter personally:

Your situation	What it can affect
Sole trader with a facility in your own name	Your personal credit history
Director who signed a personal guarantee	Your exposure if the lender calls on the guarantee
Company facility, no guarantee	The company’s commercial credit file and its standing with the lender
Any business applying for new credit	How the next lender reads your statements and conduct

Even where nothing is reported, the missed payment shows up in your bank statements. The next lender will see the dishonour and the fees, so it pays to have a short, honest explanation ready.

What should you do in the first 48 hours?

1. Find out exactly what was missed. Amount, date, and whether further payments are coming up soon.
2. Work out why. A late debtor, a timing clash or a deeper drop in trade? The answer shapes everything else.
3. Call the lender before they call you. Explain the cause in two sentences and say when you can catch up.
4. Pay what you can now. A part payment shows good faith and reduces the arrears.
5. Offer a short plan. “The overdue amount will be cleared when invoice 2210 is paid on the 15th” is far more useful than “soon”.
6. Get any arrangement in writing. Note who you spoke to and what was agreed.
7. Don’t grab the fastest money you can find. A short-term loan stacked on a struggling facility usually adds cost without fixing the cause.

If the facility simply no longer fits the business, it may be time to look at a different structure. Tell us what’s happening in a short enquiry, with no credit check at that first step, and a real person will talk it through.

Can the lender cut or cancel the facility?

Often, yes, under the terms of the agreement. Revolving facilities are usually reviewed from time to time, and many agreements let the lender reduce, suspend or cancel the limit in particular circumstances, such as a default or a material change in the business. That’s why a missed repayment matters more on a line of credit or overdraft than people expect: the lender isn’t just collecting a payment, it’s deciding whether to keep extending credit.

A quick, credible response usually keeps that review short. Repeated misses, unanswered calls and an account that sits in arrears for weeks tend to escalate it to a reduced limit, a formal default notice and, in time, enforcement of any security or guarantee.

Our pages on the business line of credit and business overdraft explain how these facilities are usually reviewed.

What does recovery look like for a real business?

Illustrative example. A commercial cleaning company with 25 staff runs its payroll through an overdraft with a $60k limit. Its biggest client, a property manager running several office buildings on 30-day terms, pays six weeks late after a system change. Payroll goes out on time, but the overdraft sits $8k above its limit and a $3k repayment on a separate line of credit is dishonoured in the same week.

The owner calls both lenders the next morning. They explain the late client, send the overdue invoice and the client’s confirmation of the payment date, and pay $1.5k off the line of credit straight away. Both lenders agree to hold off further action for two weeks. When the client pays, the overdraft comes back under its limit and the line of credit is cleared.

The owner then fixes the cause. They move the large client to fortnightly invoicing and ask about a facility sized to the real payroll gap. Lenders who see that kind of response tend to view the episode as a bump, not a warning sign. Our cleaning business loan page covers how lenders read cleaning companies more broadly.

What if you and the lender can’t agree?

Raise a complaint with the lender’s internal team first and keep it in writing. If it isn’t resolved, small businesses can take it further. AFCA explains that it can consider complaints from a small business with fewer than 100 employees about credit facilities up to $6.3 million, for complaints lodged from 1 January 2024. AFCA refers the complaint to the lender first and gives it time to resolve things directly.

Most missed-repayment situations never get that far. A business that communicates early usually reaches a workable arrangement on its own.

If the deeper issue is that the facility is the wrong shape, for example a revolving limit carrying what is really long-term debt, it can make sense to refinance. Our page on business debt refinance explains how that works, and bad credit business loans covers options when your history has taken a hit. business.gov.au’s guide to applying for a business loan is a useful checklist of what any new lender will want to see.

Facility wobbling? Let’s look at a better fit

A missed repayment is often the first sign that a facility no longer matches how your business moves money. We talk to owners in exactly this spot every week, and we look at the whole picture, not just the dishonour on the statement. Unsecured and cash-flow options typically run from $5k to $500k, and property-secured options from $20k to $5m. Bad credit is considered case by case.

The enquiry takes about 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so your phone stays quiet. A real person looks at what happened and why, then calls you to talk through realistic options. Please answer the form accurately, including any arrears, so we can find the right fit first time.

Talk to us about a better-fitting facility →