A forbearance agreement is a contract in which a creditor temporarily refrains from exercising remedies against a defaulting debtor — providing breathing room for a restructuring, refinancing, or asset sale.
At CRAGSI, we define a forbearance agreement as a contract in which a creditor agrees, for a defined period and subject to specific conditions, to refrain from exercising the remedies it would otherwise be entitled to pursue following a borrower's default. In exchange, the debtor typically acknowledges the default and commits to specific milestones — completing a refinancing, executing a sale process, or achieving operational benchmarks.
A well-negotiated forbearance can provide weeks or months of runway — enough time to close a financing round, execute a sale, or stabilize operations — without the cost, publicity, or disruption of a formal bankruptcy proceeding. CRAGSI has negotiated forbearance agreements with trade creditors, landlords, secured lenders, and note holders, achieving payment deferrals at zero interest that extended client runway by months.
Not all forbearance requests succeed, and terms vary enormously based on the leverage of the parties, the creditor's own financial position, and the perceived viability of the company. Experienced negotiators understand which creditors are likely to forbear, what concessions they will require, and how to structure a request that aligns the creditor's interests with the company's survival.
Related CRAGSI services: Turnarounds & Restructurings · Workouts