The business debt collection process

When other solutions cannot be found, we may take steps to recover your business loan. If you’ve provided security for a loan such as company assets or  a mortgage over property, we may use these to recover the debt. This is a last resort.  However, we may need to begin this process if we can’t get in contact with you or if we can’t find another solution.  In these circumstances, we’ll be upfront and clear with you, and support you and your business through the process where we can.

Reasons for formal debt collection steps

Monetary defaults

Debt collection steps  may begin if there’s  an ongoing monetary default on your business loan.  For example, the steps could begin if you’ve missed loan payments or have an overdrawn amount, and you can’t make repayments when we ask.  We can also begin debt collection if we can’t contact you or find another solution to the financial difficulty. 

Non-monetary defaults

Sometimes we may commence debt collection if certain non-monetary defaults occur.  A non-monetary default is when a borrower fails to adhere to any condition or agreement in the loan other than payment of money. Generally, this type of default occurs if we reasonably consider the default will affect you (or a guarantor’s) ability to repay your loan, or put our security at risk. Details about  non-monetary defaults and when we may act on them are set out in your business loan terms and conditions, and the Banking Code of Practice (where it applies to your loan).

The debt collection process

The steps below outline the repossession process.

1. Default or demand notices

If debt collection or enforcement steps begin , you will receive written notices from us.  These are  formal legal notices that give NAB options to recover our debts or enforce possession of securities if a resolution hasn’t been reached.

The notice will identify the reason we’re commencing debt collection steps. It will  specify:

• the details of the default(s) on your loan
• what actions you need to take to remedy the default(s) to get back on track
• the timeframe you have  to remedy the default(s).

It’s  important that you read all notices carefully, and take the required actions. For example, it may be to pay the amount in the notice, or take steps to remedy a non-monetary default within the specified timeframe. 

If you can’t take the required actions or need more time, let us know so we can understand your circumstances, and explore other options with you.  If you don’t take action or contact us, we’re likely to take further collection or enforcement steps. 

2. Enforcement of debt and possession of secured assets

If you’ve received the demand or default notices and the issues haven’t been resolved, NAB may take further steps to recover the amounts owing. This may include:

• taking possession of a mortgaged property and selling it to pay the debt
• appointing a controller, such as a receiver, under a security to take possession of and sell or dispose of assets to pay debt
• starting court proceedings to obtain a judgment for payment of the outstanding debt, or to deliver possession of secured property to us. 

These steps are a last resort.  We will approach decisions to take these steps fairly, reasonably and with compassion, and communicate with you in an open and frank way. 

Even if we have commenced these enforcement steps, we’ll stay  open to working with you to try to find an alternative solution, if that’s your preference.   Keep in mind you can also pay the debt in full at any time before we (or a controller) sell the secured assets or property.

3. Sale of secured property to repay business debt

Once we have possession of the property or assets, we’ll take steps to sell them at market value or for the best price we can obtain. You won’t be involved in the sale process, but we’ll advise you of the outcome and how we deal with the sale proceeds. 

Similarly, if a controller (such as a receiver) is appointed, they will take steps to sell the business or its assets according to their statutory duties.  We will advise you of the outcome and how we dealt with the net proceeds we received to repay the debt.

After payment of associated costs, the remaining net proceeds of the sale we receive will be paid to the outstanding loan (or loans) secured by the property or assets. If the net sale proceeds exceed the debt, the surplus funds will be returned to you.

Sometimes the net proceeds of a property sale or receivership won’t be enough to cover all outstanding debt and you (and any guarantor) will remain liable for any shortfall. If this happens, we will contact you to discuss your options for dealing with the shortfall.