Negotiating a credit line increase comes down to one thing: showing your bank that a higher limit is genuinely needed and can be serviced from the business you actually run. Walk into that conversation without knowing your own numbers, and the outcome is left to your relationship manager’s judgment call — not the facts.
This guide covers what a credit line is, legally and practically, when an increase makes sense, which documents your bank needs to decide, how the negotiation itself tends to run — and where the instrument’s limits are, including the cancellation risk under Section 490 BGB.
What a credit line is
The German term Kontokorrent (“running account”) comes from commercial law: under Section 355(1) HGB, mutual claims and services between two business partners — interest included — are continuously invoiced and periodically settled by netting and establishing the surplus. The statute governs only that netting arrangement on the business account; it says nothing about the credit itself and nothing about any interest rate.
The credit line (Kontokorrentlinie — colloquially also called Kontokorrentkredit, the drawn overdraft) is the facility the bank grants within that running-account relationship: an agreed ceiling up to which the business account may run negative. Unlike a term loan with a fixed disbursement amount and a fixed repayment schedule — see calculating a business loan — the line is drawn down and repaid continuously, with no fixed repayment date.
How the facility works in practice
Interest is charged only on the portion of the line actually drawn, not on the full agreed ceiling — that’s what sets a credit line apart from a term loan, where the full amount accrues interest from day one and an amount disbursed in tranches can carry a commitment fee on the still-undrawn part. In exchange, the rate on a credit line tends to run higher than on a secured term loan, because the bank has to plan around fluctuating utilisation at any time, which makes the facility more flexible for you but also riskier for the lender. What drawing the line actually costs, and when it’s the wrong tool altogether, is covered in the dedicated guide on overdraft facility cost.
Its real purpose is to bridge a gap: the gap between the payment terms you grant your customers and those your suppliers grant you, plus seasonal swings in day-to-day operations. For that purpose it’s the right tool; as a permanent substitute for too little equity or a structurally negative margin, it is not.
When to ask for a higher line
The right moment to ask is before the shortage, not during it. Request a higher line because the existing one is already exhausted, and you’re negotiating from the weakest position — the bank sees the risk first, not the growth. Show instead, from a 13-week cash flow forecast, that a seasonal or growth-driven peak is a few weeks out, and you’re negotiating from the position of someone who knows and steers their own position.
Typical triggers are revenue growth with a corresponding rise in working capital tied up, a longer payment term extended to a major customer, seasonal pre-financing of inventory or payroll — or simply a recurring cash flow shortage that shows up in the forecast weeks before it happens.
The documents that decide an increase
A bank reviews a credit line increase the same way it reviews any other loan: it wants evidence that the higher ceiling is needed and serviceable. The following core covers almost every request.
| Document | What it shows |
|---|---|
| Financial status | Current cash position, limits and utilisation as a snapshot |
| Bank mirror | Utilisation per bank, existing and available headroom |
| 13-week cash flow forecast | Future need, low point with and without the higher line |
| Current management accounts | Earnings performance year to date |
| Debt service capacity | Whether cash flow can carry the added interest burden |
Above a certain volume, a statutory duty kicks in too: if a loan exceeds €1,500,000 or 10 percent of the bank’s core capital in total, Section 18(1) sentence 1 KWG (the German Banking Act) only lets the bank extend it once you disclose your financial position — in particular by providing annual financial statements. Below that threshold, banks often ask for the same documents in practice anyway, just without the statutory requirement behind it. The bank mirror generator builds your financial status and bank mirror with utilisation per bank directly from your transactions. If the bank simply lacks the collateral for a higher line, a guarantee bank can partly close that gap — though you would still apply through the same house bank, not directly.
LiquidityLens shows balance, agreed limit and available headroom per bank straight from your real transactions — the basis you bring into any negotiation over a higher credit line.
See the Liquidity Control SprintThe negotiation: process and arguments
The conversation itself follows the same rules as preparing for any bank meeting: you show up with one current, consistent set of numbers, not documents pulled from three different dates. The strongest argument for an increase isn’t an appeal — it’s a comparison: show the cash low point for the next 13 weeks once with today’s line and once with the line you’re requesting, and what actually happens in the first case once the low point falls below the available headroom.
Running the debt service capacity check for the new, higher interest burden on top pre-empts the bank’s most obvious follow-up question: whether the added headroom is actually affordable once it’s fully drawn.
Compare the low point of the next 13 weeks with today's limit and the one you're requesting — the strongest argument in the room, ready to use.
Limits and cancellation risk
A credit line is not an irrevocable concession from the bank. If the borrower’s financial position, or the value of collateral provided, deteriorates materially, the lender can terminate the loan agreement under Section 490(1) BGB — before disbursement, in case of doubt, always; after disbursement, as a rule, without notice — and this applies in principle to a continuously drawn line too. That’s exactly why it pays to keep your position visibly current, not just at the negotiation table: catch and flag a deterioration yourself early, and you stop the bank from being the one to discover it first.
And a higher line never fixes the cause of a structural shortage — it only buys time. Where a line is regularly drawn close to its ceiling, the cause is worth a look: payment terms that run too long, too much working capital tied up, or simply too little equity. A 13-week cash flow forecast shows whether a higher line is the right tool or just pushes the same symptom further into the future.
On larger facilities, banks often add covenants on top — contractual conditions such as a minimum equity ratio or a minimum debt service coverage ratio that must hold for the entire term, not just at the point of the increase.
Frequently asked questions
The most important questions on negotiating and increasing a credit line are gathered at the end of this page.