Bank calling in a Business Loan

Finding the perfect solution when a bank calls in a business loan: Know your options

If you are the director of a business that has had the bank call in a commercial loan, you may be wondering why they would choose to lose interest income. Also, this has probably put your company in a very precarious financial situation to which you have no answers. How can you immediately come up with the money to settle the outstanding principal? If you had the money to do that you wouldn’t need the loan, would you?

The insolvency experts at Real Business Rescue can help you understand what is driving banks to call in loans whilst offering options which can literally save your business. If you fear formal insolvency proceedings, there is an answer to your distress. Let us help you find the option that best suits your needs.

If your bank has called in a business loan you’re probably wondering why, when they’ve been benefiting from the interest payments, and also whether the company can survive such an extreme financial demand.

Repaying a commercial loan in full, and with short notice, places immeasurable pressure on you as a director and can call into question the future of your company. Unfortunately, this is a common situation, and one with which we have extensive experience.

Our experts at Real Business Rescue can explain the background as to why banks are calling in business loans even when borrowers haven’t missed a payment, and most importantly the steps you can take to deal with the situation and prevent business closure.

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A new regulatory framework for lenders

Following the economic crash of 2008 bank practices were placed under close scrutiny by regulators, leading to the Basel Committee on Banking Supervision introducing new strategies to increase transparency and better manage risk.

An international regulatory framework was put in place, with Basel l, Basel ll, and Basel lll, introducing standards to which banks must adhere within a set timeframe. The extent to which banks can absorb the shock of a financial crisis was explored, with a major focus on capital and liquidity.

Why are banks increasingly calling in commercial loans?

An increase in the amount of liquid capital a financial institution must hold, implemented by Basel lll, has led to banks looking closely for signs of distress in companies to which they’ve granted funding.

This isn’t restricted to identifying late payments or defaults, however – banking institutions are monitoring business accounts in general for signs of distress, labelling some loans as bad debts, and then calling them in so they can increase their own liquidity and meet the new requirements.

How could this affect your business?

The new regulatory demands on banks and other large lending institutions places UK businesses at risk of insolvency should a commercial loan be called in. Bank lending is crucial for many businesses and without it growth can be severely restricted, but to be granted a loan and then have it withdrawn creates severe financial pressure that’s difficult to overcome.

Obtaining professional help if the bank has called in your loan

Professional insolvency help clarifies your options and provides a different perspective on the situation. Real Business Rescue are insolvency specialists with extensive experience across all industries.

Initially, we will inspect the terms and conditions of the original loan contract to ensure the bank is acting legally in the way they have called in the loan. It’s also worth noting that some banks are willing to negotiate a settlement less than the total outstanding amount - our licensed insolvency practitioners at Real Business Rescue have undertaken successful settlement negotiations with lenders for over 20 years.

For more information on what to do if your bank has called in a loan, please contact one of the team to arrange a free same-day consultation. We operate extensively throughout the UK, and can offer professional support wherever you are.