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:
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.
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.
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.