Your Bank Won't Renew Your Line of Credit. Here's What to Do Next.

You just got the call — or the letter. Your bank is not renewing your line of credit. Maybe they lost their appetite for your industry. Maybe your last covenant test was too close for comfort. Maybe your relationship banker left and the new one does not know your story. Whatever the reason, you now have 60 to 120 days to find a new lender, close a new facility, and pay off the incumbent bank — while running the business.

This is one of the most common situations we see. Good companies get non-renewed all the time. It rarely means the business is broken. It usually means the bank changed, not the borrower. But if you handle the next 30 days wrong, you can turn a manageable refinancing into a liquidity crisis. Here is what to do.

First: Do Not Panic. But Do Not Wait.

The single biggest mistake we see companies make is treating a non-renewal letter like a negotiation opener. It is not. Once a bank has decided to exit, they very rarely reverse. Your energy is better spent finding a replacement lender than trying to talk the incumbent into staying. The clock started the day the letter went out, and the closer you get to the maturity date without a new facility in hand, the less leverage you have — on price, on structure, and on timing.

At the same time, do not accept the first term sheet you see just because it is fast. Companies that panic-refinance into the wrong lender at the wrong pricing often end up refinancing again within 18 months. Move quickly, but move deliberately.

Understand Why the Bank Is Non-Renewing

Before you talk to a new lender, you need to know the real reason the incumbent is walking. It matters, because the next lender is going to ask, and your answer will shape what they offer. Common reasons we see:

• The bank is exiting your industry. Retail, restaurants, cannabis-adjacent, certain healthcare verticals, some construction segments — banks periodically pull back from whole sectors. If this is you, you need a lender that specifically wants your industry, not one that tolerates it.
• Covenant pressure. You tripped a covenant, cured it, tripped it again, or came uncomfortably close. The bank does not want to be there when it happens a third time. If this is you, an asset-based revolver with a springing (rather than always-on) financial covenant is often a much better structural fit.
• Concentration. Your bank has too much exposure to your industry, your geography, or your borrower size. This is about their portfolio, not your credit. It is the easiest reason to explain to a new lender.
• Deteriorating financials. Losses, margin compression, working-capital erosion. If this is you, a cash-flow bank is going to be a very hard sell — but an asset-based lender who advances against receivables and inventory (rather than EBITDA) may still be a natural fit.
• Loss of a key customer or account. Concentration risk on the receivables side. Manageable with the right structure and reserves.
• Relationship or personnel change. Your banker left, the new one does not know you, credit committee wants a fresh look and does not like what they see. Frustrating, and more common than most companies realize.

You need to be honest with yourself about which one applies. A new lender will figure it out anyway during diligence. Companies that get in front of the story do better than companies that let the story surface at the wrong moment.

What Kind of Financing Actually Fits Your Situation

Not every non-renewal calls for the same solution. The right structure depends on your balance sheet, your industry, and why the incumbent is leaving.

Asset-Based Revolver

If your business has meaningful receivables and inventory, an asset-based revolver is often the best fit — especially if the incumbent bank was pressuring you on covenants. ABL facilities advance against the value of your collateral (typically 85% of eligible receivables and 50 to 70% of eligible inventory) rather than a fixed dollar commitment tied to EBITDA. Financial covenants are usually lighter and often only apply if availability falls below a threshold. You get more flexibility, more availability during your seasonal peak, and less covenant risk. The trade-off is more reporting: monthly borrowing base certificates and periodic field exams.

Working-Capital Line at a Different Bank

If your financials are strong and the non-renewal is really about the incumbent bank rather than you, another commercial bank may still be interested in a straight working-capital line of credit — just structured differently, at different pricing, or with a different collateral posture. This is the easiest refinancing to close, but only works if the reason for the non-renewal is genuinely bank-side.

Non-Bank / Private-Credit Revolver

If your situation is more complicated — recent losses, a covenant default, an industry banks are cooling on, a leveraged capital structure — a non-bank ABL lender or private-credit direct lender may be more receptive than any commercial bank. Pricing will be higher (often 300 to 600 basis points over a bank facility), but the credit box is meaningfully wider and closing is often faster.

Factoring or A/R Financing

If you are in real distress and cannot support the reporting or scale of an ABL revolver, factoring against specific invoices can bridge you. It is more expensive, and it is a step down in structural sophistication, but it can keep the doors open. In most cases, we treat factoring as a bridge to a revolver, not a destination.

Equipment Financing or Sale-Leaseback

If a meaningful portion of your enterprise value is in machinery, equipment, or real estate, you may be able to raise a separate equipment term loan or execute a sale-leaseback to generate liquidity that reduces reliance on the revolver. This is often paired with a smaller ABL facility rather than replacing it.

The 30-Day Playbook

Assuming you have 60 to 90 days to maturity, here is how the next month should look.

Week One: Assemble the Package

Before you talk to any new lender, you need a clean package. That means: three years of financials (audited or reviewed is best, compiled is workable), interim financials through the most recent month-end, a 13-week cash flow forecast, an accounts-receivable aging (detailed, by customer), an inventory summary (by category and location), an equipment list with book values, a current borrowing base certificate from the incumbent bank, and a short narrative that explains the business, the non-renewal, and where the company is going. A lender does not need a 60-page book. They need enough to say yes or no in a few days.

Week Two: Identify the Right Lenders

This is where most companies waste time. The natural instinct is to call every bank and lender in the phone book. Do not. Every lender has a credit box — a stated appetite for particular industries, deal sizes, geographies, and structures. Sending your deal to a lender whose box does not fit is not just a wasted call — every "no" makes it slightly harder to get the next lender interested, because the market is small and lenders talk. Pick three to five lenders whose stated appetite fits your situation, and go deep with them.

Week Three: Get Term Sheets

Serious lenders can produce a preliminary term sheet within 7 to 10 days of receiving a clean package. If you are 14 days in and still explaining the business, you are with the wrong lender. Get term sheets in writing, from at least two lenders if you can, and read them carefully. Advance rates, reserves, pricing, financial covenants, fees at closing, minimum draw requirements, prepayment penalties, and exit fees all matter. A term sheet with a lower stated interest rate can easily be more expensive than a higher-rate term sheet once fees and reserves are factored in.

Week Four: Diligence and Closing

Once you have accepted a term sheet, the lender will conduct a field exam (typically 2 to 5 days on-site, or increasingly remote), order collateral appraisals if inventory or equipment is material, run background checks, and prepare loan documents. Total time from signed term sheet to closing is usually 30 to 60 days for an ABL revolver, 45 to 90 days for a more complex private-credit facility. Build that into your maturity timing.

What to Watch Out For

A few things we see repeatedly on non-renewal refinancings:

• Do not let the incumbent bank freeze you. Some banks, once they have decided to exit, will refuse to advance on new receivables, block draws, or tighten the borrowing base in ways that starve the business of working capital before maturity. If this starts happening, get a new lender in place fast — and get your attorney involved sooner rather than later.
• Do not sign personal guarantees casually. Some non-bank lenders require them by default. Whether they belong in your deal is a specific negotiation. If your business has been financed without personal guarantees for years, and the new lender is asking for them, that is a signal to look at other lenders too.
• Do not accept unrealistic exit fees. A three-year minimum term with a stiff early-termination penalty means you cannot refinance out of a bad deal cheaply if things improve. Push for reasonable exit terms.
• Do not underestimate closing costs. Field exam, legal, appraisals, closing fee, unused-line fee, agent fee. On a $10 million facility, closing costs can easily total $75,000 to $200,000. Model it before you sign the term sheet.

How DCE Helps

Don Clarke Enterprises is an independent advisory firm. We are not a lender, broker, or financial institution. We do not originate, underwrite, fund, approve, or close loans. Approval and funding decisions are made solely by the lender.

What we do — specifically for companies whose bank is non-renewing — is help you triage the situation quickly, prepare a package a lender can actually say yes to, and introduce you to the two or three lenders whose stated credit appetite most closely fits your industry, size, and structure. We do not blast your deal to fifty lenders. That approach damages your reputation in the market and rarely produces a better outcome. What produces a better outcome is a well-prepared package in front of the right lender.

Don Clarke is a Secured Finance Network Hall of Fame inductee, a Lifetime Achievement Award recipient, and the author of Asset Based Lending Disciplines, the first textbook ever written on ABL. He has personally trained more than 5,000 lending professionals at GE Capital, JP Morgan Chase, Lloyds, and Barclays — which means he knows how the credit officer on the other side of your deal is going to think about your business. When you submit a deal to DCE, Don reviews it personally. If we can help, we will tell you what it will take. If we cannot, we will tell you that too.

For lenders who need due-diligence, field-exam, or training services on their existing portfolios, our sister firm Asset Based Lending Consultants (ABLC) has been serving that side of the industry since 1986.