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Examples :: Business Letters :: Letter declining line of credit

Letter declining line of credit

A line of credit may be declined for a variety of reasons, but the most common is that the applicant is considered a bad risk. Other reasons may include a cost benefit factor, where the line of credit is too expensive to operate to be worth doing.

Declining the line of credit may also seem to create some relationship problems for businesses when the applicant is a disappointed customer.

Your position regarding declining a line of credit:

  • No business is in any way obliged to grant credit.
  • Lines of credit are granted when it's in the interest of the business.
  • A line of credit is in fact a favor to customers, reducing their costs of credit available from banks or other credit providers.
  • Providing credit can be a serious risk to businesses, where payments are irrecoverable.

In the example below, the business has decided that the line of credit requested is both below the minimum amount and too small to be worth doing. The business can't, by law, grant credit over the amount requested. The request is declined, but the business explains the situation and suggests a benchmark figure for a further application.


(Business letterhead)


Your reference
Our reference


Request for line of credit

I refer to your letter of (insert date). I regret to inform you that your request for a line of credit has been declined.

The decision to decline was based on the amount of credit requested. The amount of $1000 is below our minimum parameters. The minimum amount for a line of credit is $5000.

Please note:

  • We are unable by law to grant a line of credit in excess of the amount requested.
  • A further application for the minimum amount will therefore be required to provide credit.

Information in your original request for a line of credit indicated that your purchases would be unlikely to exceed the $1000 figure. The $5000 base figure permits purchases of any value up to that amount, so it should suit your needs.

No extra charges are incurred for the larger line of credit.

If you have any queries, or would like more information, please contact our Accounts branch on the above phone number or email.

Yours sincerely



Please note:

  • This text is intended for advisory and guideline purposes only.
  • Any business letter can become a legal document, so check your content properly before issuing.
  • Any executable or statutorily defined document should be checked for compliance with legal requirements, and you should seek legal advice regarding its contents.