Incipient default

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Incipient default

Potential default.

Incipient Default

An account that is in danger of default. An incipient default may occur when a company's sales are not as strong as expected or when it has an inordinately large amount in illiquid assets. Some loan and bond agreements require a borrower or issuer to inform the lender or bondholder if one is in incipient default. Some banks, especially mortgage providers, likewise encourage persons to inform the bank of an incipient default. Many financial institutions are willing to renegotiate the terms of payment to prevent a default from occurring.