Why one-time settlements stall at the funding step

A settlement agreed is not a settlement funded, and the gap between the two is where most one-time settlements in the Indian mid-market actually fail.

The mechanics are circular. The incumbent lender will release its charge on payment. The incoming lender will fund against that charge. Neither moves first, and the settlement carries a date. Borrowers arrive at this point believing the hard part is behind them, having spent months negotiating the number, and discover that nobody has addressed the sequencing.

The resolution is documentary rather than commercial. Release mechanics, escrow and the order of steps have to be agreed between the two lenders before the replacement facility is signed, not after. Where an incoming lender is a fund rather than a bank, this also means its investment committee has to approve a structure that funds into a charge which does not yet exist, which is a different approval from the one most borrowers ask for.

Practically: open the conversation with the incumbent about how it will release, in writing, before approaching anyone for replacement capital. A settlement without a funding path is a deadline, not an agreement.