A machine shop owner in Hamilton opens a letter from his bank on a Tuesday. His $250,000 operating line is being called, and the bank wants the full balance repaid. He has never missed a payment, so the letter makes no sense to him.
When a Canadian bank calls your business loan, it is demanding full repayment of a facility it no longer wants to carry. This usually happens after a covenant breach, a weak year-end, or a change in how the bank views your industry. You almost always have more time than the letter suggests. If the bank intends to enforce on all or most of your business assets, the federal Bankruptcy and Insolvency Act requires a 10-day notice first, and Canadian courts expect lenders to give a reasonable time to pay.
Use that window well. Get advice, rebuild your numbers, and have a replacement lender reviewing your file before the deadline arrives.
What it means when a bank calls your business loan
Calling a loan means the bank wants everything owed paid back now. The monthly schedule you agreed to no longer applies. Many Canadian business operating lines, and some term loans, are written as demand facilities. That wording lets the bank ask for repayment at any time, even when every payment has been made on schedule.
Banks rarely call a loan out of nowhere. The usual triggers are:
- A breached covenant, such as a debt service coverage ratio or working capital ratio falling below the level in your credit agreement.
- Late or missing financial statements, which the bank reads as a warning sign in itself.
- A drop in revenue or a loss year that shows up in your year-end review.
- A tax problem, such as unremitted source deductions or HST owed to the Canada Revenue Agency, which can rank ahead of the bank.
- A policy shift, where the bank decides to shrink its exposure to your sector.
Before a formal demand, many files get moved to the bank's special loans or special accounts group. Your friendly account manager stops returning calls, and a workout officer takes over. That handoff is the real warning. The officer's job is to reduce the bank's risk, which often means getting paid out by another lender.
If you signed a personal guarantee, the demand letter may name you too. Read our guide to the personal guarantee on a business loan in Canada to understand what the bank can pursue personally. With a guarantee in place, the bank can pursue your personal assets once the business can't pay.
How much time you have after a demand letter
Most demand letters set a short deadline, often 10 to 30 days. Treat that deadline as the bank's opening position. The final timeline is often negotiable. Two layers of Canadian law shape how fast a secured lender can actually move.
The 10-day notice of intention to enforce security
Section 244 of the Bankruptcy and Insolvency Act applies when a secured creditor plans to enforce on all or substantially all of the inventory, receivables, or other business property of an insolvent debtor. The lender must send a formal Notice of Intention to Enforce Security, and it cannot enforce until 10 days after sending it. Banks often deliver this notice together with the demand letter.
One detail matters here. You can consent to earlier enforcement, but the law does not allow a lender to collect that consent before the notice is sent. If a waiver form arrives with the notice, do not sign it until a lawyer has read it.
The reasonable time to pay rule
Separately, Canadian courts have held since the Supreme Court of Canada decision in Lister v. Dunlop (1982) that a lender must give a debtor a reasonable time to pay a demand before seizing assets. What counts as reasonable depends on the size of the debt, the risk to the bank's security, and how realistic it is that you can raise the money. Courts have accepted periods of only a few days in some cases, so this is no reason to stall.
A court-appointed receiver or a sale of your equipment is the bank's last resort, because it is slow and costly for them too. Most banks would rather be repaid by a new lender. Your goal is to give them that outcome before the clock runs out.
The 6-step demand response plan
The first week after a demand decides most outcomes. Owners who treat it as a refinancing project usually do far better than owners who go silent. Work through these steps in order.
- Read every page and note every date. Find the amount demanded, the deadline, and whether a Notice of Intention to Enforce Security is attached. Check which facilities and which guarantors are named.
- Call a lawyer and your accountant the same day. An insolvency or commercial lawyer can tell you whether the notice was delivered properly and what the bank can and cannot do. Your accountant can produce current numbers fast.
- Reply to the bank in writing within 48 hours. Acknowledge the letter, say you are working on a repayment plan, and ask for the specific reasons behind the demand. Silence is the fastest way to a receiver.
- Rebuild your file. Pull six months of business bank statements, interim financials, an aged receivables list, and a 13-week cash flow forecast. Lenders who refinance called loans decide mostly on these documents. Our guide to bank statements for a business loan in Canada shows what they look for.
- Ask the bank for a forbearance agreement. In a forbearance, the bank agrees not to enforce for a set period, often 60 to 120 days, in exchange for conditions such as fees, reporting, and a firm refinancing deadline. You still owe the full balance at the end.
- Apply with a replacement lender early. Do not wait until day nine. Alternative lenders can often review a complete file within days, and having an offer in hand strengthens your forbearance conversation.
If the business is truly insolvent and no lender will step in, a Licensed Insolvency Trustee can explain a proposal under the Bankruptcy and Insolvency Act. The Office of the Superintendent of Bankruptcy lists licensed trustees by province. That is a serious step with lasting consequences, and it needs professional advice.
Honestly, if your business still brings in steady revenue, a called loan is a refinancing problem first. The bank has changed its view of the risk. Your customers are still paying you.
Refinancing options to replace a called loan
The right replacement depends on what the bank was financing and what assets you can offer. Five routes come up most often.
| Option | Best fit | What the lender reviews | Main trade-off |
|---|---|---|---|
| Forbearance agreement | Viable businesses that need 60 to 120 days | Your plan and the refinancing timeline | Fees and tight reporting, and the loan still has to be repaid |
| Alternative term loan | Steady revenue, weak ratios or a bank decline | Bank statements and cash flow history | Higher cost than bank debt |
| Invoice factoring | B2B firms with slow-paying customers | Quality of your receivables | Fees reduce the value of each invoice |
| Second mortgage on property | Owners with equity in a home or building | Property value and equity | Your property secures the business debt |
| Proposal through a Licensed Insolvency Trustee | Debts the business cannot repay in full | Creditors vote on the proposal | Credit impact and legal costs |
A business term loan from an alternative lender is the most common replacement for a called operating line, because it is underwritten on your recent cash flow. Last year's ratios matter less. If you own real estate, a second mortgage can pay out the bank in one step. When several debts are squeezing you at once, business debt consolidation may simplify the payments. Receivables-heavy companies can also look at invoice factoring.
Solid Capital is a Canadian alternative lender that works with business owners and homeowners after a bank has said no, including owners whose loans have been called. We read the full file, from bank statements and revenue to the reasons behind the demand. A credit score or a broken covenant is only one part of that picture. If your bank has sent a demand letter, start an application with Solid Capital. The form takes about five minutes, there is no impact to your credit to apply, and a Canadian advisor reviews every file personally.
A demand letter feels final. In many cases it ends with a refinance and the business keeps operating. The owners who get there answered the bank quickly and kept it informed. Start this week.
Frequently Asked Questions
Can a bank call a business loan if I never missed a payment?
Yes, if the loan is a demand facility. Many Canadian operating lines and some term loans let the bank demand repayment at any time, often after a covenant breach or a weaker year-end, even when every payment was made on time.
How long do I have to repay after a bank calls my loan in Canada?
It depends on the letter and the security. If the bank wants to enforce on all or most of your business assets, the Bankruptcy and Insolvency Act requires a 10-day notice before enforcement, and courts also expect a reasonable time to pay. Many owners negotiate a forbearance period of 60 to 120 days.
What is a forbearance agreement?
A forbearance agreement is a written deal in which the bank agrees not to enforce its security for a set period. In exchange, you usually accept fees, extra reporting, and a deadline to refinance or repay. It buys time but does not reduce what you owe.
Can I refinance a called loan with an alternative lender?
In many cases, yes. Alternative lenders look at recent bank statements, revenue, and the reason for the demand. Financial ratios and credit score carry less weight. Options include term loans, invoice factoring, and second mortgages for owners with property equity.
Will the bank come after me personally?
If you signed a personal guarantee, the bank can demand payment from you as well as the business. Check whether you are named in the demand letter and speak with a lawyer about what the guarantee covers.
Should I sign the waiver the bank sent with its notice?
Not without legal advice. Signing a consent to early enforcement can remove the 10-day notice period under section 244 of the Bankruptcy and Insolvency Act, which is often the most useful time you have to arrange refinancing.
