Bank credit line policy questions (lending, fees, mortgage, loans)

[CTbrooktrout]

I represent a small business and we've had a credit line with Bank of America, approved credit.

Just recently they've canceled all remaining credit and said they want the amount taken out thus far to be paid back immediately.

Are banks allowed to roll back approved credit? And do they have the legal right to force a business to pay back credit immediately?

They suggested taking out a 2nd mortgage to pay down the credit line but then those terms would be more favorable to the bank. Won't have access to the paper work of the agreements till next week, just wondering however if these are scare tactics by BoA or do they have legal backing.


As alternative sources of credit... have people had better luck obtaining it from the smaller regional and "hometown" banks rather than the national players?

[johnrex62]

Have you reviewed the credit agreement you signed to open the lines of credit originally? What are the terms in that agreement? They likely spell out what the banks rights and your rights are in this respect.

[CTbrooktrout]

No won't have access to that paper work till Monday the earliest. Maybe BoA has standard agreement policies that others would know about? Nothing sounds fishy though?

[chet everett]

Unfortunately revolving credit lines are a huge exposure for banks -- they almost always write in the ability to quickly shut off the spigot. As far as repayment, there are probably a schedule of rates, fees, and charges as well as notice requirements that they must file with banking regulators. While it might sound fishy to you, this sort of thing is why larger companies rely on the "commercial paper" lending and why when this dried up in the MBSs crisis capital intensive industries (like the automakers) pretty much had to turn to the Gov't for help...

You probably need to brace for the worst.

[CTbrooktrout]

Thank you for the sobering opinion. I believe the situation seems to have caught the firm off guard b/c of our great history in paying other loans; have never missed a payment. I'm wondering if this is part of a larger corporate policy being handed down from people who don't even know individual companies but just see them as a number.

I'm hoping the smaller community banks that are advertising they have money to loan will be more welcoming to financing options. It seems like a golden opportunity for them to pick up clients from bigger banks.

[PUMP]

Originally Posted by CTbrooktrout

I represent a small business and we've had a credit line with Bank of America, approved credit.

Just recently they've canceled all remaining credit and said they want the amount taken out thus far to be paid back immediately.

Are banks allowed to roll back approved credit? And do they have the legal right to force a business to pay back credit immediately?

They suggested taking out a 2nd mortgage to pay down the credit line but then those terms would be more favorable to the bank. Won't have access to the paper work of the agreements till next week, just wondering however if these are scare tactics by BoA or do they have legal backing.


As alternative sources of credit... have people had better luck obtaining it from the smaller regional and "hometown" banks rather than the national players?

I have been having a little experience with Suntrust. Owe them over $12m including a $4m line of credit that I took out for survival due to the downturn in the construction market.
Never in my life been late on any loans or interest on the line. They called the line and now have filed a lawsuit to get the money instead of working it out on a longer term loan basis as i had suggested to them.
Now i will be considering filing Chapter 11 at the end of the day if they don't wake up. Also will conserve may other cash and stop paying them over $200k a month in other loans to conserve cash and fight with them forever if so takes.
If you need your line better use it while you got it, place it at other banks and be prepared to deal with the worst.
They obviously have not done a good job with their investments and now are making a fiasco of the financial system by going completely the other way.
Does anyone have any experience on how long you can drag something like this.
I can't understand a bank force me to go bad on $12m instead of working out $4m from someone that always paid their obligations.