Our Bank Was Acquired: What Happens to Our Line of Credit, and What Should We Do Now?

The announcement usually arrives as a press release, a letter from the bank's CEO, or a call from your relationship manager telling you that nothing will change. Your bank is being acquired. For most business customers, the first months really are uneventful. Statements keep arriving, the line of credit keeps funding, and the people you know are still answering the phone.

The changes, when they come, tend to show up later and more quietly: a new credit officer at renewal, a different view of your industry, a request for more reporting, a pricing proposal that looks nothing like last year's. For a company that depends on its line of credit, the time to prepare is when the deal is announced, not when the renewal letter arrives. This guide walks through what typically happens and what to do about it.

What usually stays the same

Your loan documents

In a typical bank acquisition, the acquiring bank steps into the shoes of the bank you signed with. Your credit agreement, promissory note, security documents, and guaranties generally remain in effect on their existing terms. The new bank does not get to rewrite them simply because it bought your old bank.

Your commitment, if it is committed

If your line of credit is a committed facility with a stated maturity date, the lender is generally obligated to keep lending under its terms until maturity, as long as you meet the conditions and are not in default. That is an important protection. It is worth confirming, though, because some business lines of credit are uncommitted or payable on demand. Those give the lender much more freedom to reduce or end the line. Pull your documents and check which kind you have.

What often changes

The people

Mergers often bring changes in relationship managers, credit officers, and regional leadership. The banker who understood your business and argued for you internally may move to a new role or leave. A new team will review your file with fresh eyes and less history.

Credit appetite

The acquiring bank has its own credit policies, industry preferences, concentration limits, and target client size. A loan that fit comfortably in your old bank's portfolio may be outside the new bank's preferred profile. That does not mean the new bank will act against you mid-term, but it can shape what happens at renewal.

Reporting and covenants

A new owner may standardize documentation and reporting across its portfolio. At renewal, you may see requests for more frequent financial statements, new covenants, updated collateral reporting, or different guaranty requirements.

Pricing and fees

Pricing may move in either direction depending on the acquiring bank's cost of funds and targets. Treasury management services, account fees, and online banking platforms often change as systems are combined. If your line is tied to a sweep or lockbox arrangement, a systems conversion is worth watching closely.

Warning signs to watch for

Most borrowers are fine through a bank merger. The ones who are not usually see some of these signals first:

• Your relationship manager leaves and no replacement is introduced for weeks.
• The new team asks for a "portfolio review" meeting focused on your industry or exposure size.
• Renewal discussions start later than usual, or come with a short-term extension instead of a full renewal.
• Requests for additional collateral, personal guaranties, or tighter covenants appear without a change in your results.
• You are told the bank is "reviewing its appetite" for your sector or loan size.

Any one of these is not cause for alarm. Several together usually mean the new bank is deciding whether you fit. Our guide to the signs your lender is losing interest covers these signals in more depth.

What to do now

Read your documents

Know your maturity date, whether the line is committed, your covenants, and your reporting requirements. Note any provision that allows the lender to assign or sell your loan. Our guide to lender assignment provisions explains how those clauses work.

Meet the new team early

Ask for an introduction to whoever will own your relationship and your credit file after the merger. Bring current financials, a short business update, and your plans for the next year. You want the new team's first impression of your company to come from you, not from a file review.

Ask direct questions

Is your industry and loan size within the acquiring bank's target market? Who will make the credit decision at renewal? Are any changes planned to treasury services, sweep arrangements, or reporting? Polite, direct questions usually get more useful answers than waiting.

Keep reporting clean

Deliver every report on time and accurately during the transition. A new credit team forming its view of your company will notice late or inconsistent reporting.

Start a quiet backup plan

If your maturity is within 12 to 18 months, or if the warning signs are showing, begin understanding your alternatives now. A refinancing process typically takes several months, and starting from a position of strength, before any lender pressure, gives you the best options. Our guide on what to do if your bank won't renew your line of credit covers the process.

Watch the systems conversion

Bank mergers usually end with a systems conversion weekend, when accounts, online banking, and treasury services move to the acquiring bank's platforms. For a company whose line of credit sweeps cash daily or whose customers pay into a lockbox, this deserves attention. Ask for the conversion date in writing, confirm whether account numbers, routing numbers, or lockbox addresses will change, and check that automatic draws and sweeps are tested before the cutover. Tell your customers well ahead of time if remittance instructions change. A missed sweep or misdirected customer payment during conversion week can create a short-term cash problem that has nothing to do with your business performance.

When a change of lender makes sense

Sometimes the merger is a useful prompt. If your bank line has been tightly limited by covenants or sized to past earnings, a lender that bases availability on your receivables and inventory may give you more room to operate. Our guide to moving from a bank line of credit to an asset-based revolver explains the tradeoffs. Other borrowers simply prefer a lender whose appetite clearly fits their industry and size, rather than waiting to learn whether the new bank wants them.

Whatever you decide, prepare before you need to. Our guide on how to prepare for a lender meeting covers what to bring.

How DCE helps

Don Clarke is a 2021 SFNet Hall of Fame inductee, a Lifetime Achievement Award recipient, and the author of "Asset Based Lending Disciplines," the first textbook on asset-based lending. He has trained more than 5,000 lending professionals at GE Capital, JP Morgan Chase, Lloyds, Barclays, and other institutions. That experience helps borrowers understand how a new credit team is likely to read their file.

DCE is an independent advisor and loan placement consultant. We advise borrowers on where they stand after a bank change, help them prepare the information lenders will want, and, if a new lender makes sense, introduce them to lenders whose appetite fits the business. We do not lend, underwrite, fund, or approve financing; every credit decision is made by the lender. See our advisory services and how our process works.

Our sister firm, ABLC (ablc.net), serves lenders with due diligence, field examination, and training services.

Educational only; not legal, tax, or investment advice. The effect of a bank acquisition on any loan depends on the specific loan documents and the lenders involved. Borrowers should review their agreements with qualified counsel.