Contra debtor (contra)

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

A contra debtor is a customer that is also a supplier, so that it both owes the business money and is owed money by it. Because the customer can usually set off what it is owed against what it owes, its receivable is worth to a financier only the net amount, and once the business is in trouble the customer may pay nothing until its own invoices are settled. A business owed US$400,000 by a customer to which it owes US$150,000 has at most US$250,000 a financier might count, and some financiers exclude the whole balance instead.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.