Default - What is default?

Default is the failure to make on-time payments on an amount owed.

Accept online payments from your customers with SumUp Invoices.

Generally, default refers to a company or individual who fails to make payments or interest payments on time.

It typically applies to loans taken from a bank or provider and can lead to a declaration of bankruptcy or loss of assets (collateral) that will be used to pay off debts.

Assets can be seized by authorities or collection agencies if a business is continually unable to make payments.

The implications

For a business, to default means serious financial difficulties. 

It can have an impact on future lending ability, as lenders view default as an inability for that company to make payments, as well as an indication of financial instability.

Default prevention

The only way to prevent defaulting on loans or debts is to keep thorough records of your financial transactions and maintain an understanding of cash inflow and outflow for your business.

When a company’s expenses are regularly higher than its income, that business is in jeopardy of being short of the cash needed to meet payment deadlines.

Using invoicing and accounting software will help your business keep track of income and expenses.