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Cross-default
Also called cross-default clause, cross-acceleration, default under other agreements.
A provision making a default under one agreement an automatic default under this one, so a breach you never noticed elsewhere can put a performing facility into default.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Two versions, and the difference is everything
Scope, which is where the damage lives
Read whose agreements are captured. A narrow clause covers other obligations to the same lender and its affiliates. A broad one covers "any indebtedness of Borrower or any Guarantor to any person" — which sweeps in every equipment lease, the landlord, a processor's reserve agreement, a supplier on terms, and any personal mortgage or card where the guarantor is on the note.
Also check the threshold. A clause with no dollar minimum means a disputed 900 invoice can qualify. A clause reaching non-monetary defaults means a financial statement delivered a week late to an equipment lessor is enough.
Where you meet it
In the events of default section of loan agreements, leases and asset-based facilities, and near the anti-stacking language in advance agreements.
Where this one catches people
The dangerous combination is a broad cross-default plus cross-collateralisation. One technical failure — a covenant certificate filed late, a missed insurance renewal, a dispute with a vendor you were withholding payment from — becomes an event of default under a facility you have serviced perfectly, which lets that lender accelerate, sweep the account, and enforce against collateral shared with everything else.
By the time you hold three or four positions the clauses overlap in ways nobody has mapped. Before you sign the fourth, put all the agreements on one desk and read only the events of default sections. It takes an hour and it is the cheapest legal work you will ever buy.
Worked through
Suppose you hold a bank term loan, an equipment lease and a working capital advance.
The lease requires annual financial statements within 120 days of year end. You send them at day 140. The lessor does nothing — it has been paid on time for two years and does not care.
The bank term loan contains a broad cross-default reaching any default under any agreement with any person, monetary or not, with no threshold. You are technically in default on the lease, so you are in default on the term loan. The bank's annual review picks it up.
Nothing was missed, nothing was owed, and the bank now has the right to accelerate a performing loan, reprice it at the default rate, or demand new covenants as the price of a waiver.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
Read next
Cross-default — common questions
What does cross-default mean?
A provision making a default under one agreement an automatic default under this one, so a breach you never noticed elsewhere can put a performing facility into default.
Where does cross-default catch people out?
The dangerous combination is a broad cross-default plus cross-collateralisation. One technical failure — a covenant certificate filed late, a missed insurance renewal, a dispute with a vendor you were withholding payment from — becomes an event of default under a facility you have serviced perfectly, which lets that lender accelerate, sweep the account, and enforce against collateral shared with everything else.
Is cross-default the same as an interest rate?
Cross-default is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does cross-default apply to?
Merchant Cash Advance, Term Loan, Business Line of Credit, SBA Loan, Equipment Financing, Asset-Based Lending.
Is there a worked example of cross-default?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside cross-default?
Acceleration clause, Anti-stacking clause, Covenant, Cross-collateralization, Cure period.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.