How to ask a lender for hardship help before a missed payment turns into a default

The hardest call in a business is often the one to the lender, and the reason is simple: most owners ring too late. They wait until a payment has bounced, the relationship manager is chasing them, and the only thing left to negotiate is how bad the damage will be.

This guide is about going earlier and going prepared. It covers what a hardship request really is for a business loan, how to build the case in an afternoon, the words that work, and what to do when the answer is no.

Is there such a thing as hardship for a business loan?

There is, but it is a courtesy more than a right. Consumers who borrow for personal reasons can serve a formal hardship notice that obliges the lender to respond within set time limits. A loan taken for business purposes generally sits outside that process. Your lender has no statutory duty to restructure, so the outcome depends on its own policy, its commercial judgement, and how credible you look.

That sounds bleak, but lenders have a plain commercial reason to help. A defaulted business loan is slow, expensive and uncertain to recover. A customer who is still paying something, with a believable plan, is usually worth more than a file sent to the recoveries team. Banks in particular have formal financial difficulty teams, and a well-prepared owner is easy for them to say yes to.

If your lender is a bank, there is an extra layer. The Banking Code of Practice, the industry standard that most banks have signed up to, was updated and took effect on 28 February 2025. ASIC’s announcement at the time confirmed two changes that matter here: the small business definition now reaches borrowers with up to $5 million in aggregate borrowings (previously $3 million), and the definition of financial difficulty was broadened. Law firm summaries add that the broader wording covers customers who expect to be unable to meet upcoming repayments, not only those who already have. In practice that means you can raise the issue before you miss anything, and you should.

When is the right time to ask?

Earlier than feels comfortable. The best moment is when you can see the problem coming but are still paying on time. That might be a major customer who has just moved to 90-day terms, a lease reset you can’t absorb, a wet season that has cut your trading, or a tax bill you didn’t plan for.

Three reasons to move early:

• Your credibility is intact. A clean repayment history is your strongest argument. After a missed payment it becomes a defence.
• The options are wider. Before a default, the lender can vary terms without writing anything off. After, it may be obliged to follow a stricter internal process.
• Costs haven’t started. Many loan contracts add default interest and fees once a payment is missed. Our glossary entry on default interest explains how that can compound a small problem.

If you have already missed a payment, ring anyway and say so first. Our guide on what to do if you can’t make a loan repayment covers the first 48 hours, and what happens if a business loan defaults shows the road you are trying to avoid.

What should you prepare before you call?

One page. Lenders do not want a novel, and a page forces you to know your own numbers. Build it around five points.

Point	What to write down
The cause	One or two sentences on what changed, with a date
What you have done	Costs cut, prices lifted, stock sold, owner drawings reduced
Current position	Cash in the bank, what is owed to you and by when, what is due in the next 90 days
What you can pay	A realistic monthly figure, not an optimistic one
The way back	When you expect to resume full payments and why

The “what you can pay” line is where most requests succeed or fail. Offering an amount you then miss is worse than offering less and meeting it. If you don’t have a 13-week cash flow forecast, build a simple one first; it turns “we’ll be fine by March” into a table the lender can test. The cash flow gap calculator can help you size the shortfall you are asking them to carry.

Also pull together recent bank statements for the business account, your latest BAS and any ATO arrangement you have in place. Lenders will ask for them, and having them ready shows that you take the problem seriously.

What should you actually ask for?

Be concrete. “Can you help us?” invites a polite brush-off. A specific request is easy to approve or counter.

Typical asks, from lightest to heaviest:

1. Interest-only for a set period. Usually three to six months, then back to the normal schedule. It lowers repayments without extending the loan.
2. A longer term. Spreads the same balance over more instalments. It costs more in total interest, so ask for the dollar impact before accepting.
3. A repayment pause. A short break with the missed amounts capitalised or added to the end. Make sure you understand how the balance changes.
4. A switch from daily or weekly debits to monthly. Particularly helpful for businesses with lumpy income, if the product allows it.
5. Waiving or reducing fees and default interest while the arrangement runs.

Say what you are offering in return: a reduced but certain payment, extra security, a fresh set of financials in three months, or an update call on a set date. Reciprocity makes a request feel like a plan rather than a plea.

What do you actually say when you ring?

Brevity wins. One shape that tends to land well:

“I’m calling because I can see a problem coming and want to deal with it before it affects the loan. [One sentence cause.] I’ve already [action]. I can pay [amount] a month from [date]. I’d like to ask for [specific change] for [period], and I’ll send you a one-page summary and bank statements today. Who is the right person to speak to about this?”

Then write everything down: the name, the date, what was agreed and what was not. Ask that any arrangement be confirmed in writing before the next payment is due. Verbal agreements have a way of dissolving when a different officer picks up the file.

Avoid three things. Don’t blame the lender, the ATO or the economy at length; they have heard it. Don’t promise a recovery you can’t evidence. And don’t leave out other creditors. If an ATO debt or a second lender exists, say so, because it will come out and you want to be the one who told them. Our guide to keeping a lender on side goes deeper on the relationship side.

What if the answer is no, or the offer is worse than the problem?

Not every request succeeds, and some offers just move the pain around. A long extension that keeps you paying for years may not be the win it appears. So treat the first answer as a position.

• Ask what would change it. More security, a smaller pause, a director’s update in 60 days. Sometimes the objection is one fixable item.
• Ask for review. Banks often have a hardship or customer support team separate from the branch or relationship manager.
• Use the dispute process. If you think you were treated unfairly, the lender’s internal complaint process comes first, then the Australian Financial Complaints Authority. Our guide on AFCA and small business disputes explains who qualifies.
• Get a counsellor involved. Free financial counsellors speak to lenders every week and know what is realistic. See our guide to free financial counselling for small business.
• Look at refinancing. A recovering business sometimes fits a different lender better than the one it started with. Our page for owners who’ve been declined by the bank is a good starting point, and refinancing out of expensive debt lays out when it helps and when it just resets the clock.

Whichever way it goes, don’t stop paying everything while you wait. Keep paying what you offered, on the dates you said, because your credibility is the one asset you still control.

Mistakes that quietly close doors

• Going silent after the first missed payment and hoping it passes.
• Making a promise on the call that the cash flow can’t keep.
• Taking a fast, costly loan elsewhere to cover the repayment without telling the first lender. Our guide to how to stop a debt spiral explains where that path usually ends.
• Agreeing to a change without reading what it does to the balance, fees or security.
• Treating the lender as the enemy. The person on the phone usually has discretion and would rather use it for someone who is straightforward.

Not sure your numbers hold up yet? You can talk the funding side through with us before you pick up the phone to your lender.

Where can we help if hardship talks stall?

Sometimes the honest answer is that your current lender can’t or won’t flex, and the business is still sound. That is a funding question, and it is one we see often. Our enquiry form is short: roughly a minute, and asking doesn’t leave a mark on your credit file. Nobody shops your story around to a crowd of lenders here, so there’s no flood of calls afterwards. A person reads what you’ve written and rings you to work out what might suit, and whether borrowing is even the right move.

Tell us about any arrears or arrangements already in place. Accurate answers let us start with the option most likely to fit instead of burning your week. If it’s a fit, you will hear from us; if the better path is hardship talks or counselling, we will say so.

Tell us where things stand, and we’ll take it from there →