NAB client Ross Dillon had the funding for his music equipment business slashed despite selling his family home at the bank’s request in June 2015. It placed his business in a downward spiral it is only now recovering from, he told the banking royal commission on Wednesday.

The bank had pressured him to sell the property, which secured his $5 million musical instrument importing business, since 2010 when it was hit by the global financial crisis. A first auction attempted in 2011 was unsuccessful.

Prior to the sale Mr Dillon had met with a NAB banker who was “very firm” in his demand that the family home and its adjoining farm at Scone in NSW be sold. The Dillion family agisted brood mares on the property and looked after them after they foaled.

The banker said Mr Dillon needed to invest $200,000 to $300,000 of the sale proceeds into his business, National Music, to reduce its debts. Mr Dillion said he told the banker he planned to reinvest his remaining proceeds in a smaller property in Melbourne.

The property, ‘Goanna Downs’, did not sell at auction but was sold later for $2.25 million, below the Dillons’ target of $2.5 million. Mr Dillon said he planned to do what the bank first requested and reduce “the bank’s exposure by over $1.4 million; I would have thought a good outcome for the bank”.

However, prior to settlement he received a phone call from NAB while walking in the streets of Wagga Wagga with his wife where their horse was due to race. The officer told him, “Ross, I’m sorry I’ve got to tell you we are taking all the money from Goanna Downs.”

That put an end to plans of buying a house in Melbourne. At a subsequent meeting the bank also told him not only was it taking all the money from the sale but it would reduce the business’ trade facility from $1.5 million to $650,000.

One of the reasons the bank gave for cutting the trade facility, which financed its stock imports, was that he now had no security.

“You just sold it,” the officer said. Had he known that would be the outcome, “I wouldn’t have sold,” Mr Dillon said.

Slashing the trade facility “was a disaster,” he said. The company could no longer adequately meet demand for instruments and went from a $100,000 profit to a loss of $70,000.

“It was pretty devastating. I didn’t sleep for two years,” Mr Dillon said. His wife has suffered depression and the acceleration of the onset of dementia.

Mr Dillon’s brother put $500,000 into the business which allowed it to get over the financing difficulties and it has moved towards a $70,000 profit in the current year.

NAB counsel Wendy Harris QC put it to Mr Dillon that he had discussions with the bank about contributing the total proceeds from the sale of his home to meet his loans from 2010. The bank had also commissioned a review of his business that highlighted it was running on debt levels that were too high.

A copy of the report said “our review indicated that the bank covenant of 1.5 times interest cover has historically not been met”.

“I don’t actually remember that report,” Mr Dillon said. “I don’t recall ever having said we would contribute all the funds of the sale.”

Mr Dillon said he had submitted details of his experiences to the royal commission because he thought it would be “cathartic”.