Loan Agreement Default Risk

Loan Agreement Default Risk is the risk that the firm or organization will breach the terms and conditions of its ​Loan Agreements and /or other external financing documents (or other like arrangements) due to a change in its business or financial condition. The type of breach will be dependent upon what the terms and conditions of its financing documents are.

The consequences of a Loan Agreement default can include the right of the financier to seek early repayment and/or renegotiate the terms and conditions of the financing arrangement. There is also the potential for cross default breaches, an increase in financing costs and restrictions on the firm or organization’s business activities.