Default is serious — but you still have options
When a loan falls behind, lenders often move quickly. Understanding the process early helps you negotiate better, avoid unnecessary escalation, and protect business and personal assets.
1) Confirm the default (and the numbers)
- Request updated statements and confirm arrears, interest and penalties.
- Check whether any payments are uncredited or disputes exist.
- Confirm whether the lender followed the facility terms for declaring default.
2) Know what security exists
Identify charges over land, debentures, guarantees, indemnities and assignments. The security package determines what enforcement actions the lender can take.
3) Notices and timelines
Enforcement typically involves notices and steps that must follow contractual/statutory requirements. If notice requirements are not followed, enforcement can be challenged.
4) Restructuring and workouts
- Negotiate revised repayment terms, moratoria or interest adjustments.
- Consider partial settlements, asset sales, or new investors.
- Document agreements properly (avoid “handshake” arrangements).
5) Directors and guarantors
If guarantees were signed, the lender may pursue guarantors directly. Review the guarantee scope (cap/unlimited), triggers, and whether indemnities apply.
6) Get advice early
The best outcomes usually happen before enforcement begins. Early advice helps you structure proposals, respond to notices properly, and reduce reputational and financial damage.
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