My bank is withdrawing my overdraft facility
A bank will generally withdraw a customer’s overdraft facility if they are concerned about the likelihood of not being able to reclaim their money further down the line. Banks are experts on risk analysis, and if they see you as too risky, then they will want to protect themselves.
Why have my business bank withdrawn my overdraft now?
Think about your recent account activity. Are you constantly at your overdraft limit, or have you exceeded your overdraft limit more than once? Are there regular credits being made into the business account? These are all things that your business manager will be keeping an eye on to gauge the health of your business, and the amount of risk you represent.
The withdrawal of an overdraft facility unfortunately comes at exactly the wrong time for struggling businesses. If you’ve been constantly in your overdraft and then it is withdrawn, finding this extra cash to pay back the overdraft can kill a small sole trader business. Also, the lack of a credit buffer can mean the ability to purchase stock and supplies are strangled and the situation can go downhill quickly from there.
How can McAlister & Co help if the bank has withdrawn my overdraft?
An overdraft is classed as an unsecured debt, meaning that it can be included in any debt solutions. We can draw up a bespoke proposal, such as an IVA or DMP, and present it to your creditors on your behalf. As a trusted third-party intermediary, we have an excellent success rate at drawing up debt solution proposals that are accepted by creditors such as business banks.
How can an IVA help if my business overdraft facility has been withdrawn?
An IVA arrangement reduces the monthly payments on your unsecured debt, which can include a business overdraft. This means that the bank will stop making demands for immediate repayment and reduced monthly outgoings can mean that cash flow is improved, leaving money to purchase stock and supplies. As an IVA has a fixed time period (typically five years), you are able to make future financial plans. Your sole trader business will be allowed to continue trading, so you are not also hit with a loss of income.
How can a DMP help if my business overdraft facility has been withdrawn?
Similar to an IVA, we can negotiate with your creditors to accept a DMP proposal which would reduce your monthly repayments until your financial situation was improved. Unlike an IVA, there is no set time period for a DMP and there is no writing off of any debt. The DMP is seen as breathing space to allow you to get back on your feet so that your repayments may continue as normal after a period of reduced payments.
Are there any other options?
The bank may be willing to accept a reduced amount of the total debt in a lump sum Full and Final Settlement, or you could apply for bankruptcy, or if you have very little assets or disposable income, a Debt Relief Order. Both bankruptcy and a Debt Relief Order would write-off the debt after a period of twelve months, but it is very likely that you would have to wind up your sole trader business.