Lee Daniels is ready to pay up the money he owes Damon Dash after Dame confronted him earlier this week and then later expounded on their legal matter with TMZ.

Now, Lee says Dame’s confrontation was a wake up call and he realizes he should give him his $2 million via TMZ:

The acclaimed director told us he’s been thinking about what Dame did for him, and realizes he — more than any Hollywood studio — helped him launch his career. Lee admits it’s a shame it took Dame accosting him in the middle of a Diana Ross concert for him to realize it, but now wants to do “the right thing.”

Lee finally told his side of the story when he sat down for an episode of “Raq Rants” … telling Raquel, “This black man gave me money when nobody … would give me money. He did it.”

He made it clear Dame’s $2 million was an investment, not a loan, but because the 2nd movie — “Shadowboxer” — didn’t make money, Dame didn’t get repaid.

As we reported, Dash has sued Daniels for $5 mil — the $2 mil plus interest — but Lee says “We’re gonna squash it — and I feel good about it, he needs it right now and I’m happy to help him, ’cause he was helping me.”

He also calls out Mo’Nique for being disrespectful, talks his rise to fame and more. Get in below.