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Incipient Default

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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 Says

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.

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