Troubled Debt Restructuring: What Your Lender Means by TDR

A troubled debt restructuring (TDR) is a change to your loan terms that a lender makes because your business is having trouble paying, such as a longer term, a lower rate, a payment delay, or forgiven principal. FASB's ASU 2022-02 retired the label in lender accounting, but lenders and owners still use it.

This page is general information, not legal or accounting advice (reviewed Nov 9, 2026).

Last updated: November 13, 2026

Key facts (primary sources)

• A TDR was a change where the lender, because of the borrower's financial difficulties, granted a concession it would not otherwise consider (FASB ASU 2022-02, Master Glossary).
• ASU 2022-02 removed special TDR recognition and measurement rules for CECL lenders, effective for fiscal years beginning after December 15, 2022.
• Lenders now report modifications to borrowers experiencing financial difficulty: principal forgiveness, interest rate reductions, other-than-insignificant payment delays, and term extensions (ASU 2022-02, 310-10-50-42).
• Federal bank regulators encourage prudent workouts and say examiners will not criticize a lender for a prudent workout done after a full review (Interagency Policy Statement, June 2023).
• Workouts can include a renewal or extension, extra credit, or a restructuring with or without concessions (Interagency Policy Statement, footnote 5).

What does my lender mean by a troubled debt restructuring?

When a banker says TDR, they usually mean the loan is getting new terms because the old ones are not working for your cash flow. The old accounting test had two parts: the borrower is in financial difficulty, and the lender gives a concession it would not otherwise give (ASU 2022-02 glossary). Today the bank's reporting often calls this a modification to a borrower experiencing financial difficulty.

Some lenders still say troubled debt restructure out of habit. Ask them what it means for your loan, not for their books. The call-report label matters less than the rate, term, payment dates, and any new collateral or covenants.

How does a lender decide my business is in financial difficulty?

Under ASU 2022-02 (310-10-50-45), lenders look at indicators like these. The list is not exhaustive, and they can decide this before you miss a payment.

• You are in payment default on any debt now, or likely to be soon without the change.
• Bankruptcy is filed or being prepared.
• There is real doubt the business can keep operating.
• The lender's forecast says your cash flow cannot cover the debt on current terms.
• You cannot borrow elsewhere at a normal market rate for a nontroubled borrower.

You do not have to be behind already. A lender can flag the loan from your numbers alone.

What changes in the loan terms?

ASU 2022-02 (310-10-50-42) groups disclosed modifications into four types:

• Term extension. More time to repay. Payments often get smaller; total interest often rises.
• Interest rate reduction. The contractual rate comes down.
• Payment delay or deferral (forbearance). Payments pause or shrink for a period under lender conditions.
• Principal forgiveness. The lender writes off part of the balance.

Regulators list similar workout forms: renewal or extension, additional credit, or restructuring with or without concessions. Short-term accommodations can include deferring payments, accepting a partial payment, or forbearing delinquent amounts (Interagency Policy Statement, footnotes 4 and 5). The lender may also ask for more collateral, new covenants, curtailment, or re-margining, plus signed documents (p.22 to 23).

What will the lender ask me for?

Expect paperwork before any term sheet. Regulators say a prudent workout plan rests on updated borrower and guarantor information, collateral valuations, loan structure, covenants, and legal agreements (Interagency Policy Statement, p.22 to 23). In practice:

• Current financial statements and cash flow projections.
• Financial information on every guarantor (global debt service).
• An updated collateral valuation.
• Agreement to a new structure: term, amortization, covenants.
• Signed legal documents (modification, forbearance, or amended loan agreement).

Expect the bank to look at you and your guarantors together. Pull your documents before the call. Our restructuring documents checklist lists what to gather.

Is a TDR the same as refinancing, settlement, or MCA restructuring? (commercial debt restructuring compared)

Owners hear these commercial debt restructuring paths often.

	Loan modification (TDR)	Refinance	Debt settlement	MCA restructuring
What it is	Same lender changes existing loan terms	New loan pays off the old one	Creditor accepts less than owed	Funder changes remittance amount or schedule
Typical trigger	Trouble paying current terms	Better terms or a new lender	Cannot repay in full	Debits too heavy for sales
Balance owed	Usually same unless principal forgiven	Replaced by the new loan	Reduced if agreed	Usually the same; pace changes
What changes	Term, rate, timing, sometimes principal	Lender, rate, term, collateral	Amount and payoff timing	Remittance amount or frequency
Paperwork	Modification or forbearance agreement	New loan docs and payoff	Written settlement agreement	Amended agreement or written remittance change
Read more	This page	business debt restructuring guide	business debt settlement	MCA debt restructuring

Why did the TDR label change under ASU 2022-02?

In March 2022, FASB issued ASU 2022-02. For lenders on the CECL credit loss standard, it removed the separate TDR recognition and measurement rules, effective for fiscal years beginning after December 15, 2022, with early adoption allowed. Lenders not yet on CECL pick it up when they adopt CECL.

Lenders now treat a modification like any other: new loan or continuation of the old one. They disclose modifications to borrowers experiencing financial difficulty. Call Report instructions for adopters use that newer wording (FDIC FIL-33-2023). The June 2023 interagency statement dropped TDR references from its examples. Institutions that have not adopted those updates continue TDR reporting under regulatory instructions.

The label changed on the lender's books. The conversation at the table did not. Many bankers and owners still call it a TDR. On your own books, borrower-side guidance (ASC 470-60) still exists. Whether it applies to your loan is a question for your CPA.

What questions should I ask before I sign a restructuring?

1. Exactly which terms change: rate, term, payment amount, payment dates, balance?
2. Is any interest or fees being added to the balance (capitalized)?
3. Do I need to post more collateral or add a guarantor?
4. What new covenants or reporting will I have, and how often?
5. Are there curtailment or re-margining requirements?
6. What counts as a default under the new terms, and what happens then?
7. Is this a permanent modification or a short-term accommodation, and what happens when it ends?
8. Does this affect my other loans with the same bank (cross-default)?
9. How will you report this modification? (Ask; do not assume an effect on credit.)
10. Can I get the full terms in writing before signing? (The interagency statement says lenders should give clear, accurate, timely information to the borrower and any guarantor.)

Have a licensed attorney review the agreement, and ask your CPA about tax and accounting effects if any principal is forgiven.

What if my debt is not a bank loan?

MCA funders do not run "TDRs" in the bank sense. For remittance problems, start with MCA debt restructuring. If paying in full is not realistic, see business debt settlement. For the full process across debt types, use the business debt restructuring guide.

Key terms

• Troubled debt restructuring (TDR): a loan-term change made because the borrower is in financial difficulty, with a lender concession it would not otherwise give. Former lender accounting label (ASU 2022-02).
• Loan modification: any change to the terms of an existing loan.
• Borrower experiencing financial difficulty: the current bank reporting phrase that replaced most TDR talk.
• Concession: a term the lender would not normally give, such as a lower rate or forgiven principal.
• Forbearance: the lender agrees not to enforce a default or collect payments for a period, under conditions.
• Accommodation: short-term relief such as deferring payments or accepting a partial payment.
• Workout: a broader plan to bring a struggling loan back on track.
• Term extension: more time to repay the loan.
• Principal forgiveness: the lender writes off part of the balance.
• Curtailment: a required extra principal paydown.
• Guarantor: a person or company that promised to repay if the business does not.
• CECL: the current expected credit loss standard lenders use for loss reserves (ASC 326).

Frequently asked questions

What is a troubled debt restructuring?

A TDR is a loan-term change made because the borrower is struggling to pay, where the lender gives a concession it would not normally give, such as a longer term, lower rate, payment delay, or forgiven principal. FASB retired the label in lender accounting, but owners still hear it.

Do TDRs still exist after ASU 2022-02?

The workouts do. For CECL lenders, ASU 2022-02 removed the special TDR rules for fiscal years beginning after December 15, 2022. Lenders now report modifications to borrowers experiencing financial difficulty. Many bankers and owners still say TDR.

Is a troubled debt restructure bad for my business?

It depends on the terms. A modification can lower payments, but it may add collateral, covenants, or reporting. Ask how the lender will report it and what counts as a default afterward. Have an attorney review the agreement before you sign.

What will my bank ask for in a loan workout?

Usually current financials, cash flow projections, guarantor information, and an updated collateral valuation, plus structure and legal agreements. Our restructuring documents checklist lists what to gather.

What is the difference between a TDR and a refinance?

In a TDR-style modification, your current lender changes the existing loan because you are struggling. In a refinance, a new loan pays off the old one, often with a different lender. Settlement is different: the creditor accepts less than owed. See business debt settlement.

Can I ask my lender for a loan modification?

You can ask. Regulators encourage prudent workouts with creditworthy borrowers, but no rule forces a lender to say yes. Come with current numbers and a realistic payment. This is general information, not legal advice.

Does forgiven principal have tax or accounting effects for my business?

It can. Borrower-side TDR guidance still exists, and forgiven debt can raise tax questions. Ask your CPA before you sign. This page is general information, not accounting or tax advice.

Sources

• FASB, Accounting Standards Update 2022-02
• Federal Reserve, FDIC, NCUA and OCC, Interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts (June 2023)
• FDIC, FIL-33-2023