Dishonour

To dishonour a payment is to refuse it. In Australian banking, the word describes what your bank does when a direct debit, periodic transfer or cheque is presented against your account and can’t be paid, most often because the balance is too low, sometimes because the authority has been cancelled or the account details are wrong.

Where dishonours come from

Payment type	Typical cause of a dishonour
Direct debit (loan, lease, software, insurance)	Not enough cleared funds on the debit date
Scheduled transfer you set up yourself	Balance below the amount when it runs
Cheque you wrote	Insufficient funds, a stopped cheque or a signature problem
Cheque you deposited	The customer’s bank refuses it, so the deposit is reversed

Cheques are now rare in business, so most dishonours today are direct debits. Payments to lenders that collect daily or weekly are the most exposed, because a single slow day for receipts can mean a bounced debit.

Why lenders care so much

When a lender assesses an application, it usually goes through the last three to six months of transactions line by line. A dishonour entry, and the fee that sits next to it, is easy to spot. It tells the credit assessor that, on that date, the account couldn’t meet a commitment the business had already made.

One bounced debit with an obvious cause, like a major client settling its invoice seven days behind schedule, is usually forgiven. What draws attention is a pattern: several dishonours a month, dishonours on existing loan repayments, or dishonours that are getting more frequent. That pattern suggests the business is already stretched, and a new repayment would add to the strain. Banks are generally the least flexible here. Non-bank lenders that specialise in bank statement lending are more willing to weigh up the context.

Our page on business loans with dishonours on your bank statements goes further into how different lenders treat them.

What a dishonour costs

The direct cost is fees, sometimes from two directions: your own bank for refusing the payment and the payee for the failed collection. The larger cost is what can follow. A missed loan repayment puts the account into arrears, may trigger default interest and, if left long enough, can lead to a default listing.

A worked example

A Brisbane landscaping business pays an equipment lease of $1,150 by direct debit on the 15th of each month. In March, two large customer invoices run late and the account sits at $640 on the 15th.

• The bank dishonours the debit and charges its fee. The lease company adds its own failed-payment charge and retries five days later.
• The owner calls the lease company on the 16th, explains the delay and pays the full amount on the 19th, before the retry.
• In May the owner seeks a working capital facility. The assessor spots one dishonour in March, asks about it, accepts the late-invoice explanation and moves on, because April and May are clean.

The phone call made the difference. A second and third bounce in April would have made the application much harder.

Preventing the next one

Line up debit dates with when customers usually pay, hold a modest cushion in whichever account the lender debits, and run your numbers through our cash flow gap calculator to measure the shortfall. A business line of credit can absorb timing gaps so debits don’t bounce in the first place. When you’d like to talk through options, our enquiry form takes a minute.

Recent dishonours and need funding anyway?

Plenty of businesses get through a rough patch with a few bounced debits on their statements. Let us know the story behind them and the amount you’re after. It’s about sixty seconds of typing, no credit enquiry is made when you send it, and it goes to one person on our team rather than to every lender in town. They’ll look at your statements in context and ring you back. Please be candid about the dishonours on the form: it helps us point you straight to lenders that will accept them.

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