Can't repay your business loan? Practical steps to take now

Not being able to repay a business loan is stressful, but it’s also common, and it’s usually fixable when you deal with it early. A missed repayment is the start of a conversation with your lender, not the end of one. This page sets out what typically happens, what to say, and the options that tend to work. For the rest of the borrowing cycle, see how business loans work.

What happens when you can’t repay a business loan?

The process usually unfolds in stages, and you have the most room to move at the start:

Stage	What usually happens	What you can do
Before a missed payment	Nothing yet; the lender doesn’t know	Call now and ask for a short-term arrangement
First missed or dishonoured payment	Re-attempted debit, possible dishonour fee, a reminder	Pay what you can, call the lender, explain the cause
Arrears for a few weeks	Collections contact, late fees	Agree a plan in writing and stick to it
Prolonged arrears	Formal notices, possible default listing	Escalate to the hardship team, get free advice
Default and enforcement	Demand for the balance, action on security or guarantees	Seek professional advice urgently, negotiate a sale or refinance

Most loans never reach the bottom rows, because the borrower and lender sort it out higher up. That’s the goal.

What should you do first?

Act within days, not weeks. Here’s a practical order:

1. Work out the gap. How much can you pay this week, this month and next month? A rough cash flow for the next 13 weeks is ideal.
2. Find the cause. Is it a late-paying customer, a seasonal dip, a lost contract, an unexpected tax bill? Lenders respond better to a specific, temporary cause with an end date.
3. Call the lender. Ask for the financial difficulty or hardship team. The Australian Banking Association’s advice is simple: the sooner you call, the more options your bank has to help.
4. Propose something. Rather than just saying you can’t pay, offer what you can: half repayments for three months, interest only until a debtor pays, a catch-up plan.
5. Get it in writing. Confirm any arrangement by email, including the dates and amounts.
6. Keep to it. A broken arrangement is much harder to replace than the first one was to agree.

business.gov.au also suggests having a profit and loss statement or cash flow forecast ready when you speak to your lender about hardship.

What options might a lender offer?

It depends on the lender and your situation, but common arrangements include:

• A short payment deferral, with missed amounts added to the balance or caught up later.
• Reduced or interest-only repayments for a set period.
• Extending the term so each repayment is smaller.
• Restructuring the loan, sometimes combining facilities.
• Waiving or reducing fees charged during the difficult period.
• Switching repayment frequency to match when your cash actually arrives, for example from daily to weekly.

The ABA lists deferrals, restructures, interest deferrals case by case, waived fees and debt consolidation among the options banks can offer. Non-bank and private lenders don’t all follow the same rules, but most would rather agree a plan than enforce security.

What if other debts are part of the problem?

They usually are. business.gov.au recommends a budget that separates what must be paid now from what can wait, and speaking to every creditor early to ask about extensions or instalments. A few priorities to keep in mind:

• Secured lenders can act on property or assets, so keep them informed.
• The ATO has payment plan options; debts of $200,000 or less can generally be set up online. See our page on ATO tax debt funding.
• Wages and super for staff should be protected.
• Customers who owe you money are part of the solution: chase overdue invoices firmly.

Sometimes the cleanest fix is refinancing business debt into one facility with a longer term, especially if property equity is available. If you’d like to explore that, ask us about your options; there’s no credit check when you first get in touch.

What should you say when you call the lender?

Many owners put off the call because they don’t know what to say. Keep it short and factual. A simple script:

1. Who you are: business name, loan or account number, your role.
2. What’s happened: “We lost our main customer in August” or “A large client is paying 60 days late”.
3. Where things stand: “We can pay half the repayment for the next three months” or “We’ll be short for two repayments”.
4. When it ends: the date or event that brings cash back, such as a new contract starting or a debtor paying.
5. What you’re asking for: a specific arrangement rather than an open-ended pause.
6. What you’ll send: a cash flow forecast, recent statements, or evidence of the new work.

Write down the name of the person you speak to, the date and what was agreed. If the first person can’t help, politely ask to be transferred to the financial difficulty team.

What should you avoid doing?

• Ignoring calls and letters. Silence is what pushes a lender towards formal action.
• Taking a fast, expensive loan to cover a repayment without a plan. It usually deepens the hole.
• Stopping BAS lodgements. Keep lodging even if you can’t pay; unlodged returns make every option harder.
• Promising more than you can deliver. A modest plan that sticks beats an ambitious one that fails in a month.

How does this affect your credit file and guarantees?

It can, which is another reason to act early. If you’re a sole trader or have given a director’s guarantee, missed payments may eventually be recorded on your personal file. The OAIC explains that consumer defaults are listed for amounts of $150 or more that are at least 60 days overdue, and that defaults stay on file for five years. Commercial credit files can also record business defaults.

Once a plan is agreed and kept, the story your file tells next time is very different from a default that was ignored. The credit score page covers how lenders read those records later.

Where can you get free help?

You don’t need to work it out alone:

• Small Business Debt Helpline, 1800 413 828: free, independent and confidential advice for small business owners and sole traders in financial difficulty.
• Your accountant: to prepare cash flow figures and check your tax position.
• Your lender’s financial difficulty team: often more flexible than the collections team.
• AFCA: if you can’t resolve a dispute with the lender directly, it handles small business complaints free for businesses with fewer than 100 employees, on credit facilities up to $5 million. Start with the lender’s own complaints process first.

Running a business under debt pressure is draining. If it’s affecting your health or sleep, talk to someone; business.gov.au lists support services that are available around the clock.

An illustrative example

Illustrative only. A commercial cleaning company loses its largest contract when a client goes into administration. Revenue drops by a third for two months while it wins new work. Its equipment loan and an unsecured cash-flow loan are both due.

The owner calls both lenders in the first week, before anything is missed. She shows a 13-week cash flow, the lost contract and two signed replacement contracts starting in eight weeks. The equipment financier agrees to interest-only repayments for three months. The cash-flow lender moves from daily to weekly debits and extends the term. She chases two overdue invoices, sets up an ATO payment plan for the next BAS, and is back on normal repayments by month four.

What if the business can’t recover?

If the numbers don’t work even with a restructure, get professional advice early. Options can include selling assets, refinancing against property, bringing in a partner, or formal processes your accountant or a registered insolvency practitioner can explain. Acting while there are still choices protects you, your guarantors and your creditors.

Want to talk through your options?

Whether you need breathing room on one loan or a better structure for all of them, a calm conversation is a good place to start. Tell us what’s happening in a short enquiry. It doesn’t trigger a credit check, your details aren’t passed around to multiple lenders, and a real person will listen before suggesting anything. Please be upfront about arrears, tax debts and what you can afford, because honest numbers lead to solutions that actually last.