Cure period
What is a cure period, or grace period, in a loan agreement?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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A cure period is the time a facility agreement allows a borrower to put a breach right before it becomes an event of default — a few business days for a missed payment, longer for a late report or a breach that can be remedied. It is negotiated, not given: whether a breach can be cured at all, and in how long, is one of the few clauses that decides how a bad quarter plays out. Some agreements also allow an equity cure, in which the owners inject money to bring a financial covenant back into line, usually a limited number of times over the life of the loan.
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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