Standstill Period

A standstill period caps how long a senior lender can block payments to junior creditors after triggering blocking rights. Without one, the block can run indefinitely — the bank declares a default, freezes distributions to the seller note holders, and there's no clock forcing resolution. A typical negotiated standstill runs 90 to 180 days. Once the period expires, the borrower can resume payments to junior creditors regardless of whether the default has been cured. The standstill may also limit how many times per year the senior lender can invoke a block — for example, no more than one blockage period per 12-month cycle. Founders rarely negotiate standstill provisions directly because they're embedded in the intercreditor agreement between the buyer and the bank. But the absence of a standstill is a red flag worth raising before signing. If the senior lender can block payments forever with no time limit and no cap on frequency, the seller notes are functionally worthless during any period of financial stress.