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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Event of default

What counts as an event of default on a business loan?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

An event of default is one of the listed circumstances that entitle a lender to act: typically non-payment, a covenant breach, a false statement, insolvency, a default under another lender's facility, a change of control, and often a material adverse change as the lender judges it. What the lender may then do — stop drawings, reprice, demand repayment, enforce its security — is set out in the agreement. A first breach usually starts a conversation rather than enforcement, but the clause is what gives the bank its seat in that conversation.

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.

// WHAT IT IS NOT

Not the same as a review event, which obliges the two sides to talk and lets the lender vary terms; it does not let the lender act at once, though many review clauses let it require repayment on notice if no agreement is reached.

// WORKED IN

// NEXT TO IT

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