When a client is leaning ever harder on credit
An overdraft that lives at its limit and credit cards that never clear are not financing decisions — they are symptoms. This play reads them as such.
What this play helps you do
- Distinguish strategic borrowing from credit being used to plug a cash gap
- Read a permanently drawn overdraft as a structural signal
- Quantify the cost of the gap-filling so the client sees it
- Address the underlying cash shortfall rather than the borrowing
6 min read
The signal
The warning here is not that a client uses credit — almost all do — but how they use it. An overdraft that sits near its limit every single month, rather than swinging up and down, is a tell. So are credit cards carrying a rolling balance that never quite clears, and an increasing reliance on the next finance facility to cover the last one's repayments.
Used this way, credit has stopped being a buffer and become a permanent prop holding the business upright.
What it means
A facility that is permanently drawn is funding an ongoing shortfall, not a temporary timing gap. The business is consuming more cash than it generates and bridging the difference with borrowing — which works until the facility is full or the lender declines to extend it. At that point the shortfall has nowhere to go.
It also quietly raises the cost of every dollar the business earns. Interest on permanently drawn facilities is a standing drag on margin, so the credit reliance both signals the problem and deepens it. Reading it early lets you treat the cause before the facility ceiling forces a crisis.
Run the play (steps)
- Look at overdraft utilisation across several months — permanently near the limit is the signal, not the occasional spike.
- Check whether card balances revolve or clear; a never-clearing balance is gap-filling.
- Watch for new facilities being taken to service existing ones.
- Estimate the annual interest cost of the permanent drawings and show it to the client as a number.
- Trace the shortfall to its source — slow receivables are a frequent driver.
What to say to the client
Reframe the borrowing as a symptom: "Your overdraft hasn't come off its limit in six months — that's not a buffer any more, it's funding a gap. Let's find the gap, because the facility won't stretch forever."
Where the gap is fed by overdue customers, recovering that cash reduces the need to borrow at all. Show the client how a debt referral can turn aged invoices back into the working capital they are currently renting from the bank.
When to bring in Merion
Escalate the receivables side when a client is leaning on credit to bridge a shortfall that overdue debtors are feeding. Converting stuck invoices to cash directly reduces the borrowing and the interest drag. This is general information only, not tailored financial advice.
Key takeaways
- It's not whether a client uses credit, but whether the facility is permanently drawn.
- A facility at its limit funds a structural shortfall, not a timing gap.
- Permanent drawings carry a standing interest cost that erodes margin.
- Recovering overdue invoices reduces the need to borrow in the first place.
FAQ
Is using an overdraft a bad sign?
Not by itself. The warning is an overdraft that never comes off its limit, which indicates it is funding an ongoing gap rather than smoothing timing.
Why show the client the interest cost?
Because the standing cost of permanent drawings is a tangible number that reframes the borrowing as a problem to solve rather than a tool in use.
How do receivables fit in?
Slow-paying customers often create the very shortfall the credit is plugging, so freeing that cash can shrink the reliance on borrowed funds.
Run the play — we'll handle recovery
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