Cross-default
What is a cross-default clause in a loan agreement?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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A cross-default clause makes a default under any of the borrower's other debts — another bank's loan, a lease, an asset finance contract — an event of default under this facility too. It stops one lender waiting while another is paid down or enforces, because whatever happens to one obligation happens to all of them. The detail is in the threshold and the trigger: a clause that bites only above a minimum amount, and only when another debt has actually been accelerated rather than merely missed, gives the business room to settle a dispute without bringing every lender in at once.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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