Letter to withdraw Credit from Customer

A letter to withdraw credit from a customer is a letter written by a company or an organization to its customer. In this letter, the company informs the customer about withdrawing the credit facility, that was previously offered, from him.

Many businesses operate on a credit basis, which means they do not make the payment as immediate cash and allow the customer to have some time after the transaction to make the payment. However, sometimes, this credit account may prove to be burdensome for the company in the form of low levels of cash available at hand, which affects many transactions that require immediate payments by the company. If this gets out of hand, some companies often withdraw the credit option from its customer, and the customer can only transact with the company by making a cash payment.

Some reasons behind withdrawing credit from the customers are:

  • A company needs more cash than credit due to supplier payments, operational expenses, etc.
  • The customers are making delayed payments.
  • The collection of payments has become costly in terms of time and cost.
  • The number of default customers is increasing.
  • The company management has changed and brought policy amendments.

If the company decides to withdraw credit from a customer, it needs to formally inform the customer regarding the change as well as request him for releasing the owed payment by writing a letter addressed to the customer. The letter to withdraw credit from the customer can include varying details as per the circumstances. However, the general information included in such letters are:

  • Date.
  • Details of the company or organization.
  • Details of the customer.
  • State that the credit account is being withdrawn from the customer.
  • State from when it will be effective.
  • Reason for withdrawing.
  • Show regret or apologize for the inconvenience.
  • Show the customer value and the hope for a continued relationship.
  • Mention the owed money and request the customer to release the payment till a certain date.
  • Salutations and signature.

Sample Letter to Withdraw Credit from Customer





Dear Mr. Wilson,

I am writing this letter to inform you that due to some financial issues, which our company is experiencing, unfortunately, we will not be able to continue providing you the credit facility.

We have been facing problems regarding delays in our customer payments, which affects our cash flows and operations. Due to this, we have changed our policy, and effective from 1st February 2020, we will not be able to deal with our customers on a credit basis.

As of today, i.e. 25th January 2020, you owe our company ABC Limited $[X]. Kindly, release this payment till 29th January 2020. We apologize for withdrawing the credit option, and we regret any inconvenience caused. We hope you understand our business situation.

You have been our valued and loyal customer over the years, and we look forward to continuing serving you in the best manner. If you have any queries, you can contact us at [X]. Thank you.


Sarah William.

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