Incipient Default

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Quick Ratio

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

    A loan where interest is recorded as earned when payment is collected. ...
  3. Debtor In Possession - DIP

    An individual or corporation that has filed for Chapter 11 bankruptcy ...
  4. Default

    1. The failure to promptly pay interest or principal when due. ...
  5. Default Risk

    The event in which companies or individuals will be unable to ...
  6. Nonperforming Loan - NPL

    A sum of borrowed money upon which the debtor has not made his ...
Related Articles
  1. What Is A Corporate Credit Rating?
    Investing Basics

    What Is A Corporate Credit Rating?

  2. Are Your Stocks Doomed?
    Markets

    Are Your Stocks Doomed?

  3. An Overview Of Corporate Bankruptcy
    Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

  4. Subprime Lending: Helping Hand Or Underhanded?
    Investing Basics

    Subprime Lending: Helping Hand Or Underhanded?

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center