Incipient Default


DEFINITION of 'Incipient Default'

When a borrower appears to be heading toward defaulting on its debt. An incipient default is the foreshadowing of a person or company's inability to service a debt obligation.

BREAKING DOWN 'Incipient Default'

Within the loan arrangement, the lender can make specific provisions regarding an incipient default. Such provisions may place covenants on the borrower or impair a contractual right. Incipient defaults may be determined based on current business problems, such as an illiquid balance sheet or a low quick ratio.

  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. ...
  2. Cash Basis Loan

    A loan where interest is recorded as earned when payment is collected. ...
  3. Default

    1. The failure to promptly pay interest or principal when due. ...
  4. Nonperforming Loan - NPL

    A sum of borrowed money upon which the debtor has not made his ...
  5. Default Risk

    The event in which companies or individuals will be unable to ...
  6. Debtor In Possession - DIP

    An individual or corporation that has filed for Chapter 11 bankruptcy ...
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  2. Does working capital include salaries?

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  3. Are dividends considered an asset?

    Whether dividends paid on stock are considered an asset depends on which role you play in the investment: the issuing company ... Read Full Answer >>
  4. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  5. What is a profit and loss (P&L) statement and why do companies publish them?

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