Quick answer
If a bank has reduced, cancelled or refused a business overdraft, the main alternatives are a non-bank line of credit, a short-term working capital loan, invoice finance or a property-secured facility. Alternative lenders often set limits from bank statements, and they consider tax debt and credit issues that commonly cause banks to withdraw overdrafts.
Key points
- Non-bank lines of credit work much like an overdraft
- Limits usually set from bank statements
- Invoice finance suits businesses with slow-paying customers
- Property security supports larger limits
When the safety net disappears
For years an overdraft quietly smoothed out the bumps. Then a letter arrives: the limit is being reduced, or not renewed. Sometimes it follows a tax debt or a quiet year; sometimes it is simply a policy change. Either way, the business has lost the buffer it relied on, often at the worst moment.
Replacing what the overdraft did
| What the overdraft did | Alternative that does it now |
|---|---|
| Smoothed weekly ups and downs | Non-bank business line of credit |
| Covered a seasonal dip | Short-term working capital loan |
| Bridged slow-paying customers | Invoice finance |
| Provided a large standby limit | Property-secured facility between $20,000 and $5,000,000 |
How alternative lenders set a limit
Most look at six to twelve months of bank statements: average deposits, how often the account dips low, and existing commitments. Some connect securely to your account so the assessment takes minutes. Tax debt on a plan and older credit issues are considered rather than treated as automatic stops.
Size it properly
The overdraft limit you had may not be the right number now. Use the cash flow gap calculator to find the real low point in your cash flow, then add a buffer. That is the figure to ask for.
Fix what triggered the cut
If the bank pulled back because of ATO arrears, clearing them may be part of the plan. The page on refused overdraft increases explains common bank triggers. Getting BAS lodged and tax current makes every future facility easier and cheaper.
An illustrative case
A wholesale nursery supplier ran its business on a bank overdraft for years, dipping into it every spring when stock was bought ahead of the planting season. After a wet year cut sales and a BAS fell behind, the bank reviewed the facility and halved it at renewal. Spring orders were due within weeks.
The business replaced the missing half with a non-bank line of credit sized on its bank statements, kept the reduced overdraft for day-to-day use, and set aside a weekly amount for GST in a separate account. Twelve months later, with tax current and sales back to normal, it had two facilities instead of one and a much clearer view of its cycle.
Questions to ask about any replacement facility
- Is there a fee on the limit even when I am not using it?
- How quickly can I draw funds once it is set up?
- Will the limit be reviewed, and what could cause it to be reduced?
- Does it sit alongside my bank account or replace it?
The answers tell you whether the new facility will behave like the overdraft you relied on.
Get a replacement lined up
Send a 60-second enquiry and tell us the limit you had and what changed. No credit check applies at this point, a specialist reads it, and nothing is passed on. Replace your overdraft.
Frequently asked questions
Why would a bank cancel my overdraft?
Common triggers include tax arrears, a fall in revenue, a credit default, a breach of loan conditions or a change in bank policy toward your industry. Banks often review overdrafts annually.
Is a line of credit the same as an overdraft?
It works similarly: you draw and repay within a limit. The difference is that it is a separate facility from a non-bank lender rather than part of your transaction account.
Can I keep banking with my bank?
Yes. Most alternative facilities work alongside your existing bank account.
How fast can I replace an overdraft?
Lines of credit and short-term loans can often be set up within days when statements verify quickly.
Prefer to start now? Enquire here
About 60 seconds. No credit check when you first enquire, and a person who handles unusual deals calls you back.