Glossary · contract

Event of default EOD

Also called EOD, default event.

Any condition a contract lists as putting the borrower in default, most of which have nothing to do with missing a payment.

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

The clause is a list, and it is longer than most people expect. Typical entries:

  • Non-payment, or a returned debit, or a stop payment instruction
  • Breach of any covenant, or any representation turning out to have been false when made
  • Taking additional financing, which makes stacking a default on the earlier deal
  • Change in ownership, control or entity structure
  • Closing, selling or relocating the business, or changing the depository bank or payment processor
  • Bankruptcy, assignment for the benefit of creditors, or insolvency
  • A judgment or lien above a stated threshold
  • Cross-default: a default under any other agreement, with this funder or sometimes with anyone
  • Material adverse change, an open-ended clause allowing the funder to call a default on deterioration it judges significant
  • Failure to deliver statements, maintain insurance, or pay taxes

An event of default is a right, not an obligation. Funders sit on them, and an unexercised right stays available.

Where this one catches people

The additional-financing clause is the one that bites hardest. Taking a second advance while a first is outstanding is, in most agreements, an immediate default on the first, which means the earlier funder can accelerate the moment it sees the new debits in your account. Merchants think of stacking as a pricing question. In the documents it is a breach.

Where you will meet this term

Merchant Cash Advance Term Loan Business Line of Credit Equipment Financing Asset-Based Lending

Read next

Acceleration clauseThe clause that makes everything still owed due immediately on default, rather than on the original schedule. CovenantA promise in the loan documents about what the business will do, will not do, or will keep true, breach of wh… Cross-defaultA provision making a default under one agreement an automatic default under this one, so a breach you never n… DefaultThe condition of having broken an agreement, by missing payments or by breaching any other promise in it, whi… Material adverse change (MAC)A clause letting a lender suspend funding, demand more collateral or call the facility when the borrower's co… StackingTaking an additional advance or loan while an existing one is outstanding, so two or more fixed debits run ag…

Event of default — common questions

What does event of default mean?

Any condition a contract lists as putting the borrower in default, most of which have nothing to do with missing a payment.

Where does event of default catch people out?

The additional-financing clause is the one that bites hardest. Taking a second advance while a first is outstanding is, in most agreements, an immediate default on the first, which means the earlier funder can accelerate the moment it sees the new debits in your account. Merchants think of stacking as a pricing question. In the documents it is a breach.

Is event of default the same as an interest rate?

Event of 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 event of default apply to?

Merchant Cash Advance, Term Loan, Business Line of Credit, Equipment Financing, Asset-Based Lending.

Is there a worked example of event of default?

Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.

What else should I read alongside event of default?

Acceleration clause, Covenant, Cross-default, Default, Material adverse change.

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.