A default charge is a cost that can apply when a facility falls into default — that is, when the conditions in your agreement for default are met, usually after sustained non-payment or an unresolved breach.
How it differs from a late charge
A late-payment charge relates to a single missed or late payment. A default charge belongs to the more serious default stage, which is reached only after earlier steps — contact, explanation and attempts to agree a way forward — have not resolved the position.
What it covers
- It is defined in the default section of your agreement, on a stated basis.
- It can sit alongside continued accrual of interest on the outstanding balance.
- It may be accompanied by reasonable recovery costs, where your agreement provides for them.
How to avoid it
Stay in contact with us. Default is a last resort, and a company that engages early almost always avoids reaching it. If your circumstances change, tell us before payments are missed.
Context
We keep this definition figure-free because the basis depends on your agreement. The facility is to your company, with no personal guarantee from directors. This is exempt business lending, so the Financial Ombudsman Service and FSCS do not apply.
See also: Arrears (glossary), Glossary: default and Glossary: total cost of credit.