Sometimes, through no particular fault of anyone, a business relationship sours and becomes undesirable for one or both parties. Uncured defaults, communication breakdowns, deteriorating fiscal performance, new ownership, questioning of management capability, and general dissatisfaction are some of the things that can cause a creditor to want to be out of a relationship. Unfortunately, for the creditor to wish to be out doesn't necessarily make it so.

It is well known that there are many, many sources of non-traditional or non-institutional financing. Factors, asset based lenders, hard asset based term lenders and others provide viable financing products that can be used as replacements for traditional sources. While many of these sources will take risks that a conventional institutional lender may not, underwriting and pricing standards may be substantially different. Conventional lenders should be aware that considerable time may elapse before a replacement lender comes into the picture and a deal is closed. And, in many cases two, three, or more replacement lenders will be introduced before the right mix is found.

Time is a very important consideration if an institutional lender desires to be paid out of a relationship. Sometimes, lenders fail to recognize that their long term interest of being taken out will be enhanced by being patient in the short run. Much as collateral can't usually be sold for the highest possible price if it is being liquidated, replacement financing can't usually be found if the debtor is perceived as having one foot in the grave. The creditor frequently has a higher likelihood of getting out if prepared to allow the replacement process to play itself out.  That does not mean, though, the creditor must be inactive. Reporting, communication, and other required servicing don't have to be ignored. 

The strain that asking to be paid in full and moving the business puts on a relationship can frequently severely impair communication. Before the relationship becomes completely adversarial and progress stalls, it may be wise to consider having an intermediary facilitate the wind-down of the relationship. Typically, several developing situations have to be handled at or nearly at once. The creditor's requests or demands have to be made known to the debtor as do the debtor's responses. Information must be collected for and negotiations conducted with replacement financing sources. In short, there are many things to do. Neither the creditor nor the debtor may be able to devote sufficient time to the process, and, because of the situation generally, neither may be particularly inclined to devote sufficient time to the process. A good outside intermediary can be exactly the right buffer between the creditor and debtor to keep the replacement financing process moving forward as quickly as possible. Additionally, an outside provider who works regularly with sources of replacement financing can help explain some of the delays, requirements, and intricacies if and when they occur.

Discounting, while not always a desired way to solve a problem may, under some circumstances, be the best way for a creditor to extract itself from an unwanted situation. 

Typically, creditors feel somewhat victimized when confronted with the discounted price offers from sources of funds for these type transactions. While it may not be possible to get a significantly better deal, a third party may be able to help the creditor understand all the motives and see the advantages of discounting more clearly.