A settlement discount is only useful if its funding is real and its terms resolve the intended obligations. Do not promise a lump sum based on speculation.
Corporate Recovery Partners
01 / 06
The discount depends on money that is not yet available
A creditor offers to accept a reduced lump sum if paid promptly. The business owner wants the discount but would need an uncertain family loan and a quick vehicle sale to fund it. The creditor’s letter does not explain whether guarantees or legal costs are included. The owner needs to assess both affordability and the scope of the proposed settlement.
Identify the amount, deadline, parties, debts, costs and release conditions. Ask whether the offer concerns the company only or also named guarantors and security.
Have the terms reviewed before accepting. A lower headline figure can leave unresolved liabilities if the agreement does not address the obligations you intended to settle.
Separate cleared money, committed finance and possible contributions. If an asset sale is involved, calculate net proceeds, required consents and realistic timing.
Do not count the same money as both settlement funding and operating cash. The business still needs to meet obligations that remain after the deal.
Use a cash forecast to assess a smaller initial sum, instalments or a later date for the creditor to consider. Business.gov.au’s forecasting framework helps expose the gap between the demanded amount and available resources.
Explain the proposal with evidence and do not assume the creditor must accept it. Request any extension clearly, while tracking the original offer and any separate legal deadlines.
Compare the settlement benefit with the cost and risk of emergency borrowing or personal security. Obtain advice if the company cannot pay due debts or the proposed payment would leave it unable to operate.
If no funded agreement is possible, address the next legal and financial steps promptly. An honest inability to accept is better than a signed settlement that fails immediately.
