Forbearance
What is forbearance on a business loan?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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Forbearance is a lender agreeing not to enforce its rights for now — accepting reduced or deferred payments, relaxing a covenant, extending a maturity — for a borrower in financial difficulty that it believes can recover. It gives the business time, and it is meant to be temporary and conditional. Banks track forborne loans separately, and supervisors expect them to, because forbearance can also hide a problem: repeated concessions to a borrower that cannot recover delay a loss rather than avoid it.
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.
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