Failure to meet the terms of a contract, such as missing payments or breaking covenants.
For example, a company that misses three consecutive monthly loan payments and fails to maintain the minimum DSCR required by its loan covenant is considered in default, which gives the lender the right to demand immediate full repayment or begin enforcement proceedings.
Why it matters: It triggers severe penalties, accelerates repayment, destroys credit ratings, and can lead to the seizure of the business's core assets.
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