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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Negative pledge

What is a negative pledge in a loan agreement?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A negative pledge is the borrower's undertaking not to give security over its assets to anyone else without the lender's consent. It protects the lender's position whether or not the lender takes security itself, which is why it is the backbone of much unsecured corporate lending and why secured lenders include it too. In practice it is the clause a growing business trips on by accident: an equipment lease or a supplier's registered interest can count as a new security interest, and unless the agreement carves it out, each needs consent first.

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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