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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Forced-sale value

What is forced-sale value, and why does a bank use it?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

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Forced-sale value is what an asset would fetch if it had to be sold quickly, by someone other than its owner, in the circumstances in which a lender would be selling it — usually a business that has failed. It sits below market value, sometimes far below for stock, specialised plant or a half-finished building. A lender reads security at forced-sale value because that is the only situation in which the security is ever used, and the gap between book, market and forced-sale value is where most disappointment about security comes from.

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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