What does default mean on a business loan?

2 min read

Serious breachWhat it is

Balance dueThe consequence

AvoidableWith early action

What triggers it

Default is typically triggered by missed payments over a set period, but it can also come from breaching a covenant, providing false information, or a cross-default on another facility. On default, the lender may demand the full balance, add fees, enforce any security, and report it to credit agencies.

How to avoid it

Read the default clauses before signing so you know the triggers. Keep payments and covenants on track, and if you see arrears building, talk to the lender before it tips into default. Most defaults are avoidable with early, honest communication. A default seriously harms your credit, so it's well worth heading off.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

Can I default without missing a payment?

Yes. Breaching a covenant, giving false information, or a cross-default on another loan can all trigger default even if you're up to date on payments. Read the default clauses so you know every trigger.

What happens after a default?

The lender may demand the full balance, charge fees, enforce any security, and report the default to credit agencies, harming your score. That's why heading off arrears with early communication is so important.