Quick answer
When a bank moves a business loan to its restructuring (or 'workout') team, it has reclassified the exposure as higher risk — usually after a covenant breach, arrears, a weak annual review or a security shortfall. It is not a demand for repayment. The new team's job is to reduce the bank's risk, so expect more reporting, fees and tighter terms. Respond with a 13-week cash forecast, a written plan and a parallel refinance option.
Key points
- A transfer changes who manages the loan and what they're measured on — not, by itself, the loan contract.
- For Code-covered small businesses, the 2025 Banking Code sets minimum notice periods before enforcement.
- An investigative accountant may be appointed; prepare for it rather than resist it.
- Run the bank's plan and a refinance plan side by side — the second strengthens the first.
The email is polite and short: your relationship manager is “handing the file over” to a colleague in a team with a name like business restructuring, credit management or lending services. The new contact wants a meeting, the latest management accounts and a cash flow forecast — this week.
What has actually happened is a change in how the bank classifies your loan. The exposure has been moved out of the sales-driven relationship channel and into a unit whose job is to protect the bank’s position. That isn’t a demand for repayment, and many businesses come out the other side intact. But the next 90 days matter more than any annual review you’ve had.
Why does a bank move a loan to its restructuring team?
Banks rarely give a single reason, but the triggers are predictable. In our experience the file usually moves after one or more of these:
| Trigger | What the bank saw | What the new team will focus on |
|---|---|---|
| Covenant breach | DSCR, interest cover or gearing below the agreed test | Whether the breach is temporary or structural |
| Arrears or overdraft hard-core | Missed repayments, or an overdraft that never swings back into credit | Cash flow, creditor stretch and ATO position |
| Weak annual review | Falling EBITDA, late or qualified accounts | Credibility of forecasts and management |
| Security shortfall | A lower revaluation or a sold property | Loan-to-value and extra security |
| External red flags | ATO debt, defaults on credit file, a large customer failing | Whether other creditors may act first |
If the cause was a breach, read our page on handling a loan covenant breach alongside this guide — most workout files start there.
What changes when the file moves?
The contract usually doesn’t change on day one. The people, incentives and pace do.
- The objective shifts. A relationship manager is measured on growing a book. A restructuring manager is measured on reducing risk: lower limits, more security, or the loan leaving the bank.
- Reporting tightens. Expect requests for monthly management accounts, aged debtors and creditors, an ATO portal statement and a rolling 13-week cash flow forecast.
- Approvals slow down. Limit increases, new equipment finance or releasing a guarantee become difficult while the file sits in the unit.
- Costs appear. Facility documents commonly allow the lender to charge for reviews, variations, revaluations and reports it commissions. Ask what each one will cost before agreeing to it.
- The bank may ask for more. Additional property, a guarantee from a new director or a general security agreement are common requests. Our page on when the bank wants more security covers how to negotiate that.
What does the Banking Code say about notice and defaults?
The 2025 Banking Code of Practice commenced on 28 February 2025. ASIC approved it after the aggregate borrowing limit for small business protections rose from $3 million to $5 million. The small business definition is the first thing to check: broadly, annual turnover under $10 million, fewer than 100 full-time equivalent staff and less than $5 million in total debt across all credit providers.
If you’re inside that definition, the points that matter in a workout are:
| Situation | Code protection (summary) |
|---|---|
| Missed loan payment | At least 30 days’ notice of the payment failure before a demand or enforcement |
| Non-monetary default that can be fixed | At least 30 days’ notice to remedy it |
| Non-monetary defaults generally | Must fall within listed categories and be material, or likely to have a material impact |
| “Material adverse change” | No default based on unspecified material adverse change in standard-form small business loan contracts |
| Bank won’t extend a loan that isn’t in default | At least three months’ notice before full repayment is needed |
| Investigative accountants | Bank must act fairly; may appoint an alternative if the relationship has become unworkable |
The notice periods can be shortened where the borrower or a guarantor is insolvent, or where the bank reasonably needs to manage a material and immediate risk. And businesses above the thresholds — common among SMEs with $10m-plus turnover — fall outside these protections and are governed by their facility documents. Either way, pull the letter of offer and the general terms out of the drawer now.
What happens if the bank appoints an investigative accountant?
Banks often commission an independent review when they’re unsure whether the business can trade through. The accountant typically looks at cash flow, the debtor book, stock, creditors, tax obligations and the realistic value of security. Treat it as an exam you can prepare for:
- Ask for the scope in writing — what questions the bank wants answered, who pays and the estimated fee.
- Nominate one point of contact, usually the finance director or external accountant, so answers are consistent.
- Give them a clean data room: three years of financials, year-to-date management accounts, aged ledgers, the 13-week forecast, a debt schedule and ATO statements.
- Lead with your own diagnosis. A one-page note explaining what went wrong, what has been fixed and what’s still at risk frames the report before it’s written.
The concern many owners raise is that an investigating accountant can later be appointed as receiver. The Code requires banks to manage that conflict with additional internal oversight, which is another reason to engage early and openly rather than defensively.
How should you respond in the first 30 days?
Speed and candour carry more weight than a perfect answer. A practical sequence:
- Week 1: Acknowledge the transfer in writing. Confirm the facilities, limits, maturity dates and any defaults the bank says exist. Ask what information it wants and by when.
- Week 2: Build a 13-week cash flow forecast, receipts and payments, with the bank debt and ATO obligations shown separately. Use the working capital cycle calculator to find cash tied up in debtors and stock.
- Week 3: Write a short turnaround plan: causes, actions taken, a 12-month forecast, and how covenants recover. Test the cover numbers with the debt service cover calculator.
- Week 4: Open a parallel refinance conversation, so you know your alternatives before the bank tables its terms.
Want a confidential view on whether your security and trading story would support a move away from the bank? Start a short enquiry — it doesn’t trigger a credit check.
When is refinancing out the better answer?
Some workout files end with the business returned to the relationship team. Others end with the bank asking for the debt to be repaid, sometimes politely through a shortened maturity or a decision not to renew. Refinancing is usually the better route when:
- the bank’s proposed terms (amortisation, fees, extra security) would choke the recovery;
- the issue was a one-off that has passed, but the bank’s appetite for your industry has changed;
- there’s genuine equity in property that the bank’s structure isn’t recognising; or
- you need fresh working capital and the bank won’t lend more while the file is in the unit.
The sequencing matters. A refinance lender will want the debt schedule, the reason for the move and evidence you’ve engaged honestly with the incumbent. Our guide to refinancing business debt covers discharge costs and settlement steps, and the non-renewal page explains how to use a notice period. Where a full takeout isn’t needed, a second-ranking facility can fund an agreed debt reduction that satisfies the bank.
A worked example
Illustrative only; no real business. A Queensland building-products distributor turns over $8.4 million. A large customer’s insolvency wrote off $310,000 of debtors, EBITDA fell from $1.15 million to $690,000, and its DSCR covenant of 1.25x was tested at 0.98x. Total bank debt is $3.1 million, so the business sits within the Code’s small business definition.
| Item | Before the loss | After the loss | Plan by month 6 |
|---|---|---|---|
| EBITDA (annualised) | $1,150,000 | $690,000 | $960,000 |
| Annual debt service | $705,000 | $705,000 | $560,000 |
| DSCR | 1.63x | 0.98x | 1.71x |
| Debtor days | 52 | 61 | 48 |
The plan: tighter credit control lifts cash by around $120,000; the owners refinance $900,000 of bank debt onto a property-secured facility over a commercial unit they hold personally, cutting the bank’s exposure; and the remaining bank term debt is reset. The bank sees its exposure fall by almost a third with a clear path back to covenant — the kind of outcome restructuring teams are measured on. Without the parallel refinance, the bank’s alternative was a shorter maturity and a request for that same property as extra security.
What should you avoid?
- Going quiet. Missed calls and late information are the fastest way to be treated as high risk.
- Signing new security in a hurry. Get advice before giving a guarantee or mortgage, especially over a family home.
- Paying the bank at the ATO’s expense. Unpaid PAYG withholding and super can create personal director exposure; see our page on ATO debt for established businesses.
- Ignoring the complaints path. If you believe the bank hasn’t followed the Code or its own terms, use its internal complaints process first. The Australian Small Business and Family Enterprise Ombudsman explains the next step to the Australian Financial Complaints Authority.
Ready to look beyond your current bank?
Being handed to a restructuring team is a signal to take control of the timetable, not to wait for the bank to set it. The businesses that recover fastest are the ones that walk into the second meeting with a forecast, a plan and a credible alternative already on the table.
That alternative is what we work on. The enquiry takes about 60 seconds, and there’s no credit check when you first enquire. We don’t hand your file to a pile of lenders — one specialist reads your situation, including the bank’s position, your security and the trading story, and calls you to talk it through. Property-secured facilities run from $20,000 to $5,000,000, and past credit issues and ATO debt are considered case by case. Please complete the form accurately — total debt, turnover and the security available — so the first conversation is about options that genuinely fit.
Frequently asked questions
Does being moved to the restructuring team mean the bank will call in my loan?
Not necessarily. Plenty of businesses are managed back to the mainstream relationship team, and plenty more refinance out in an orderly way. The transfer means the bank wants closer control and a clear path to reducing its risk. The outcome depends heavily on how quickly and credibly the business responds.
Can the bank make me pay for an investigative accountant?
Facility documents commonly let a lender recover the costs of reports it reasonably commissions, so check your letter of offer and general terms. Ask for the scope and a fee estimate in writing before work begins. For small businesses covered by the 2025 Banking Code, banks must act fairly when using investigative accountants, and if the relationship with that accountant becomes unworkable the bank will consider appointing someone else.
Am I covered by the Banking Code of Practice?
The 2025 Code's small business protections broadly apply where the business group has annual turnover under $10 million, fewer than 100 full-time equivalent staff and less than $5 million in total debt to all credit providers. Larger SMEs are often outside those protections and rely on the facility documents alone, so read them closely.
How much notice does a bank have to give before enforcing?
For Code-covered small business loans, the 2025 Code generally requires at least 30 days' notice of a payment default before a demand or enforcement, and at least 30 days to remedy a remediable non-monetary default. There are exceptions, such as insolvency or a material and immediate risk to the security. If the bank simply decides not to extend a loan that isn't in default, it must give at least three months' notice.
Should I refinance straight away or try to work it out with the bank?
Usually both, in parallel. A credible refinance option gives you negotiating leverage and a fallback if the bank's terms become unworkable. Equally, a refinance lender will want to see that you've engaged constructively with the incumbent bank, so don't go silent.
Can a non-bank lender refinance a loan that's in the bank's workout unit?
Often, yes, particularly where there's property security with adequate equity. Property-secured facilities from $20,000 to $5,000,000, including second mortgages and caveat loans, are assessed on the security, the exit strategy and the trading story, with past credit issues and ATO debt considered case by case.