The overdraft is gone, and nobody gave you notice

An overdraft is repayable on demand, and the Banking Code of Practice says so in those terms: a small business gets at least 30 days' notice of a missed payment before a demand on a term loan, and at least 3 months' notice if a loan will not be extended, but for an overdraft or other on-demand facility the bank may not be required to give any notice at all when it requires repayment. That is why the letter arrived without warning. A frozen account is a different problem with different causes, and it is worth knowing which one you have.

Why this one arrives without warning

Because of what an overdraft is, rather than because of anything the business did. An overdraft is not a loan with a term running to a date. It is a limit on an everyday account, repayable on demand, and the rules that protect a small business borrower are written around that distinction rather than around how it feels.

The Banking Code of Practice is the document to read, and the version in force took effect on 28 February 2025. It binds the member banks of the Australian Banking Association that have adopted it, which is a condition of membership for a bank with a retail presence in Australia, and it covers individuals, small businesses and individual guarantors.

On a term loan it gives a small business two substantial protections. Before a bank demands full repayment for a missed payment it will give no less than 30 days' notice of the payment failure, and it will not act at all if the overdue amount is paid inside that window. And where a loan is reaching the end of its term and is not repaid by its regular repayments, a bank deciding not to extend will give notice of that decision at least three months before the loan has to be repaid in full.

Then comes the sentence almost nobody has read. For an overdraft or other on-demand facility, the Code says the bank may not be required to give you any notice when we require repayment. The protections are real. They mostly stop at the overdraft.

You are not the first one this week

Most owners whose overdraft disappears ring the bank that withdrew it, and then another bank, and the answers are the same shape. A bank that has just removed a limit is not going to write a new one, and a bank that has never seen the business reads a recently closed facility as the headline rather than as one decision among many. It almost never says no because it has decided the loan would not be repaid.

That gap is where HomeSec has been since 2004. What we look at is whether there is enough unused equity in real property and whether the purpose is a genuine business one: not financials, not a credit score, not what another lender's review concluded. From a clean, complete scenario funds can be available in as little as 24 hours, and interest can be capitalised for up to six months.

Back to the substance, because the first thing worth doing here costs nothing.

What the Code still requires, even here

The on-demand carve-out is narrower than it first looks, and the rest of Part B5 is worth knowing before any conversation with the bank. Four things it requires:

1. 1
   The grounds have to be named, for anything other than a missed payment.Where a bank acts on a default that is not a payment failure, it will give a notice specifying the grounds on which it considers there is a default, and no less than 30 days' notice where the default can be remedied. It may act only on the specific events listed in the Code — insolvency, another creditor commencing proceedings, materially misleading information, early repayment being required under a separate arrangement with the same bank, and the others in that list.
2. 2
   It has to be material.A bank will act on one of those events only where it is material, or where it reasonably considers the event to have a material impact on the ability to repay, on the security, or on legal or reputation risk. A technical breach that changes nothing is not the test the Code sets.
3. 3
   No unspecified material adverse change.Standard form small business loan contracts will not include an event of default based on unspecified material adverse changes. This is the clause the regulators spent years on: ASIC reported in 2018 that the four major banks had addressed their event of default clauses, including material adverse change events, limited broad indemnification clauses, removed entire agreement clauses, and limited their ability to vary contracts unilaterally to specific circumstances with appropriate advance notice, for small business loan contracts up to $1 million.
4. 4
   Reasons, where a new application is declined.Where a bank does not approve a loan it will tell the customer the general reason why, unless it is reasonable for it not to. That is a different obligation from the review decision that removed the overdraft, and it is the one to lean on if the same bank declines a replacement facility.

Whether a particular business is a Small Business for the Code's purposes is a test set out in the Code's own definitions, and it is worth checking against the current version rather than assuming. A business above the threshold is in a commercial negotiation rather than a protected one, which changes what is worth arguing about.

The contract itself may be challengeable

Separate from the Code, and more useful than most owners realise. A facility agreement that was handed over to be signed rather than negotiated is a standard form contract, and small business standard form contracts carry statutory protection.

ASIC's published position is that the protections apply where the business has fewer than 100 employees when the contract is signed, or a turnover under $10 million for its last income year, with an upfront price cap of $5 million for a financial product or service. A term is unfair where it would cause a significant imbalance in the parties' rights and obligations, is not reasonably necessary to protect the legitimate interests of the party it advantages, and would cause detriment, financial or otherwise. A term found to be unfair is void — treated as though it never existed — and the contract carries on without it if it can.

ASIC's own worked example is close to this situation: a term letting a lender change any term in unspecified ways on five days' notice may be unfair, because five days is not a real and reasonable opportunity to leave the contract without penalty when refinancing or selling an asset takes longer than that. Whether any particular clause meets the test is a question for a lawyer. It is raised here only because almost nobody asks it, and the answer occasionally changes the conversation entirely.

A frozen account is a different problem

Worth separating, because the two get muddled and they are fixed by different people. A withdrawn overdraft is a credit decision: the limit is gone, the account cannot go below zero, and the money in it is still yours. A frozen account is an operational block: the balance is sitting there and nothing will move. Three causes account for most of them.

The first is a garnishee notice from the ATO, which is a document with a process behind it and a page of its own — what the ATO can take from a bank account covers what the notice is and what it reaches. The second is the bank's own anti-money-laundering process, and this is the one that produces the silence: Australia's anti-money-laundering law limits what a bank may tell a customer about a report it has made to the regulator, so the branch is often genuinely unable to explain, and pressing a staff member for a reason achieves nothing. The third, and the most commonly overlooked, is a dispute or ambiguity about who is authorised to operate the account — a departed director still listed, a signatory removed, a change of structure never completed.

The Code's account rules are thinner here than its lending rules, but not empty: where a bank closes an account that is in credit under its terms and conditions, it will, if appropriate, give reasonable notice of the closure and pay out the credit balance. And for an unfavourable change other than to an interest rate or a repayment, the general rule is at least 30 days' prior notice, with a shorter period allowed where it is reasonable to manage a material and immediate risk.

The practical order is the same in every case: establish in writing which of the three it is, because each has a different person who can lift it, and none of them is the staff member on the phone.

What a secured loan does here, and what it does not

Briefly, because the eligibility page covers the mechanics and whether financials are needed covers the paperwork.

An overdraft covers the gap between doing the work and being paid for it, so when it is removed the problem is a working capital one rather than a solvency one. The assessment here is the equity and the purpose, so a facility another bank withdrew is not an input in the way it is for a lender reading a credit file. The range is $20,000 to $5,000,000. Interest can be capitalised for up to six months, which matters particularly on this file, because a business that has just lost its buffer is not in a position to start repayments in the same month. The term is open, so the exit can be a new facility at bank pricing once the trading history supports one. Secured against unsecured sets the two side by side, and cash flow lenders compared is worth reading before signing anything quick, because the fast online facilities are the ones most often reached for in this exact week.

What a loan cannot do is restore the overdraft or reverse the bank's decision. It replaces the function the overdraft was performing, which is not the same thing, and it is worth being clear-eyed about the difference before borrowing.

When borrowing is not the answer

Said plainly, because losing a buffer creates the kind of pressure that makes people sign quickly.

Where the overdraft was being used as permanent capital rather than as a buffer — drawn to the limit every month and never cleared — replacing it with another facility funds the same structural gap a second time. That is a conversation about the business rather than about credit, and it is worth having with an accountant before it is had with any lender. A trading pattern that reads as a decline is sometimes the real subject, and it is a different fix.

Where there is no equity in real property, a secured loan is not our answer and we will say so on the first call rather than the third. The useful calls then are to a financial counsellor — the National Debt Helpline on 1800 007 007 is free, independent and confidential — and to an accountant or a registered liquidator if more than one creditor is pressing.

Two narrower cases where the answer is also no. Where the amount is below $20,000 we do not lend to it at all, because registering a security over a property for a figure that size is the wrong tool for the job. And where the account is frozen rather than the overdraft withdrawn, borrowing solves nothing until the block is lifted: money paid into a frozen account is money you also cannot reach, and the first call is to whoever placed the block rather than to a lender.

This page explains why a business overdraft can be withdrawn with little or no notice when a term loan cannot, what the Banking Code of Practice still requires of a bank, what the unfair contract terms rules cover for a small business, and how a frozen account differs from a withdrawn facility. It is general information, not legal, credit or insolvency advice: what is right in your circumstances is a question for a lawyer, an accountant, a registered liquidator or the Australian Small Business and Family Enterprise Ombudsman, and the Code and the rules are amended from time to time. Figures and rules were checked on 20 October 2026 and can change.

Reviewed by Paul Stone, Joint Chief Executive