How to Handle Sudden Changes in Credit Lines or Banking Relationships

As a small business owner, one of the most shocking and frustrating experiences is discovering that a bank can change or shut down your line of credit without warning. This happened to me on more than one occasion, and it was a stark reminder of how critical it is to safeguard your business finances.

In one instance, a bank abruptly closed my line of credit without prior notice. It was a punch to the gut—there I was, relying on that credit to manage cash flow, and suddenly, it was gone. With little recourse, I was forced to scramble and secure alternative funding to keep my business running smoothly. I learned the hard way that you can’t assume your banking relationship is stable just because it has been up to that point.

On another occasion, I needed to draw on my line of credit for payroll. At the last minute, the bank held up the process, demanding that I put my house up as collateral to access funds that had already been agreed upon. Prior to this date, the line of credit was backed by company assets. The pressure was immense, but it opened my eyes to the need for a contingency plan.

To protect your business from sudden banking changes, I recommend maintaining multiple credit relationships. Don’t rely on just one bank, as I did. Always have an emergency reserve or alternative sources of funding, and if possible, negotiate terms that don’t put your personal assets at risk.

By being proactive and diversifying your financial options, you can avoid being caught off guard and better safeguard your business from banking uncertainties. Connect with me here are learn about other challenges your business may face on the road to growth.

Written by Darlene M. Ziebell