Forbearance agreement period options: using the window to assess licensable records

What happens during a forbearance agreement period

A forbearance agreement gives a borrower in default a defined period during which the lender agrees not to exercise its remedies, in exchange for conditions: acknowledgment of the defaults, tighter reporting, fees, and milestones such as a refinancing commitment, a signed letter of intent for a sale or an agreed restructuring plan. When the period ends, the borrower has met the milestones, negotiated an extension, or faces enforcement.

The options tested in that window come down to a short list. A data license is not a cure on its own, but forbearance is the best time to find out whether the borrower's operational records could become one more source of value, and to stop them being lost in cost cuts.

Which options a forbearance period typically tests

If the path ends in a chapter 7 case, records nobody has assessed are often abandoned; the page on section 554 abandonment explains what that means for them.

Why the forbearance window is the moment to assess records

Three things happen during forbearance that put records at risk. Cost cuts in the 13-week cash flow cancel software subscriptions. Staff who know the admin accounts leave. And if the outcome is a sale or a wind-down, systems are migrated or retired on someone else's schedule.

An early, lightweight inventory costs little and preserves the choice. It also produces facts the lender wants anyway: which systems exist, how many years each holds and who controls the admin accounts.

Lender consent and the credit agreement

Read the credit agreement before anyone discusses terms with a licensee. Asset-sale and disposition covenants, lien and negative-pledge provisions, and restrictions on licensing intellectual property outside the ordinary course can each catch an exclusive data license, and the security agreement may extend the lender's lien to general intangibles. Forbearance agreements often add limits on transactions outside an approved budget. Check, too, whether proceeds would fall into a mandatory prepayment sweep.

Accounting matters for covenant tests. How a license is structured can affect when revenue is recognized under ASC 606, depending on whether the customer receives a right to use or a right to access the licensed IP, as Deloitte's revenue recognition roadmap explains. Ask the borrower's auditors before forecasting any payment, and check how the credit agreement treats non-recurring income.

This is general information, not legal, tax or financial advice. Confirm with your own counsel and the borrower's auditors before acting.

How a SourceX timeline compares with forbearance milestones

Be realistic: a license rarely closes inside a short forbearance period, so treat it as upside rather than a milestone. Two reference points help. Once a company is deal-ready, buyers typically respond within about two weeks, and payment typically arrives within about 60 days of invoicing once the buyer selects the data. Everything before that depends on how quickly the company completes its inventory and agrees terms.

Illustrative timeline for a 90-day forbearance:

Who to talk to

• The borrower's CEO or CFO, who would sponsor the process if the company proceeds.
• The CRO or financial adviser running the 13-week cash flow, who decides which subscriptions get cut.
• The lender's workout or special assets officer and lender counsel, who decide on consent.
• Borrower counsel, for the credit agreement and any duties that shift as insolvency nears.
• The IT lead or managed service provider, who knows what each system holds and how to export it.

What to say

For the borrower's adviser, raising it with the lender:

What to preserve during the period

• Email and chat archives, with retention settings unchanged
• CRM, help desk and project histories, exported before any plan downgrade
• ERP and finance data, including closed years
• Code repositories and issue trackers
• Shared drives and document systems, including archived folders
• A written list of admin accounts, owners and renewal dates

The wind-down engagement letter shows how advisers can write records preservation into their scope if the process ends in a wind-down, and the trustee's view of the same problem is in overlooked intangible assets in chapter 7.

Mistakes that cost borrowers their records

Which borrowers are worth assessing

A borrower is worth introducing when it is a US operating company that reached 50+ full-time employees at peak (contractors excluded), has kept documented records for several years, owns the rights to them, and has a CEO, CFO or owner prepared to sponsor the process. Professional services borrowers are often strong candidates; the guide on dissolving a consulting firm shows what the firm owns and what belongs to clients. Run a preliminary screen with the company fit checker and read who qualifies for the full list.

Next step

Raise records in the first options meeting, not the last. If the borrower looks like a fit, register as a partner and make the introduction, or have the CFO apply at sourcex.si/apply with your referral link. Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, payable only after the buyer pays and SourceX receives its fee. Lenders should check their institution's policies on fees connected to borrowers before registering.