The Creditor's Dilemma A Mandate for Workout vs. Sale
Every non-performing loan on your books presents a binary choice: engage in a long, costly war of recovery, or execute a clean, strategic sale. This is the definitive protocol for making that decision.
The Advisor's Thesis
The amateur asks, "How can I recover this asset?" The professional asks, "What is the highest and best use of my capital right now?" The answer to the second question is the only one that matters. This framework is designed to provide that answer.
The Operator's Path: The Loan Workout Protocol
The first option is the path of the Operator: a direct, hands-on attempt to restructure or recover the debt. This involves loan workout strategies such as forbearance, loan modification, or, as a final step, foreclosure. For a skilled special assets department, this path can yield high returns. But it is a war of attrition, and it comes with hidden costs.
- Capital Drag: Every day a loan is non-performing, it is a dead weight on your balance sheet and a distraction from new originations.
- Operational Cost: The man-hours, legal fees, and administrative resources required for an effective NPL recovery process are immense.
- Risk of Failure: A workout is not a guaranteed success. A failed modification can lead to an even more costly foreclosure process down the line.
The Financier's Move: The Strategic Sale Protocol
The second option is the path of the Financier: a clean, strategic sale of the asset. When you ask, "should I sell my charged-off debt," you are asking if you want to trade the uncertainty of a long recovery for the certainty of immediate cash. Our confidential, off-market protocol provides three definitive advantages:
- Immediate Liquidity: Converts a dormant asset into predictable working capital that can be redeployed.
- Total Risk Transference: The entire burden and cost of the collection process is transferred to the buyer.
- Certainty of Execution: Provides a guaranteed cash exit at a known price, eliminating uncertainty.
The Verdict: A Comparison of Protocols
The choice between a workout and a sale is not about which is "better." It is a strategic decision based on your firm's core identity. This matrix clarifies the choice.
| Factor | The Workout (Operator's Path) | The Sale (Financier's Move) |
|---|---|---|
| Timeline | Months to Years | 30-45 Days (T+30) |
| Outcome | Uncertain | Certain |
| Capital Efficiency | Low (Capital is trapped) | High (Capital is liberated) |
| Risk Profile | High (Market, Legal, Operational) | Zero (Risk is transferred) |
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The first step in making the right decision is knowing the true, executable value of your asset in today's market. Contact our desk to begin a confidential, data-driven valuation.
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