Suggested Provisions For Forbearance Agreements

Introduction

When a commercial loan goes bad, the lender generally has two choices: (i) do everything it can to collect the loan, including a collection suit versus all obligors and/or liquidation of collateral or, (ii) work with the borrower by providing some time for it to right the ship and regain its financial footing. The latter option typically involves the parties entering into a forbearance agreement whereby the lender does not exercise any of its rights or remedies under the loan documents in exchange for certain terms, conditions and concessions from the obligors. The subject of this article is a non-exhaustive list of some provisions to consider including in a well drafted forbearance agreement.