Default is the point at which a borrower has broken the terms of a loan agreement in a significant way, most commonly by failing to keep up the agreed repayments. It is a more serious stage than simply being in arrears, and the agreement sets out what it means and what may follow.
What can trigger it
- Persistently missing repayments without resolving the position.
- Breaching a key term of the agreement.
- Other events specifically defined in your agreement as a default.
Why it is worth avoiding
A default can have consequences for the company, which may include an impact on its credit profile and the steps a lender is entitled to take under the agreement. The good news is that default is usually the end of a path that started much earlier, which means there is normally time to act before it is reached.
If you are heading for difficulty
Talk to us as soon as you can. Where a business is in genuine difficulty, we look for a workable way forward rather than rushing to formal steps.
Credicorp lends only to UK limited companies and LLPs for business purposes, and we do not take personal guarantees from directors. If your Credicorp Flex or Credicorp Slice account is under pressure, contact our team early.
See also: Glossary: default (business lending), What is a promissory note? and Can I pay my loan off early?.