What is a cross-default provision?

A cross-default provision makes a default under one agreement automatically a default under another, even if the second agreement is fully current. The breach itself is the trigger — the other creditor does not need to take any action for the default to spread.

What is the difference between cross-default and cross-acceleration?

Cross-default triggers at the moment of breach under another agreement. Cross-acceleration triggers only if the other creditor actually accelerates — declares its debt immediately due. Cross-acceleration is the narrower, more borrower-protective form, because breaches that are waived or resolved never spread.

What is a cross-default threshold?

A dollar amount below which defaults on other obligations do not trip the clause. Negotiated versions of financing documents commonly include a threshold so a minor dispute cannot place a major facility into default. Broad drafts may have no threshold at all.

Do leases have cross-default clauses?

They can. A commercial lease may be cross-defaulted to another lease with the same landlord, to related agreements such as a franchise or license tied to the space, or to equipment financing. The clause's reach depends on which obligations the draft sweeps in.

Cross-Default vs. Cross-Acceleration: One Breach or a Chain Reaction

A default on one agreement staying contained to that agreement is not something a borrower gets automatically — it depends on whether the other documents contain a cross-default or a cross-acceleration clause. The two get treated as synonyms, but they trigger at very different points, and the gap between them is the difference between one problem and a chain reaction.

This is an observational explainer of both provisions and the terms that widen or narrow them. It is general information, not advice about your documents. The legal judgment about what to do with what you find is yours.

Cross-default: the hair trigger

A cross-default clause says that a default under one agreement is automatically a default under this one. If a business breaches a loan covenant with Lender A, Lender B's cross-default clause puts the Lender B loan in default too — even though every payment to Lender B is current. Lender B does not have to wait for Lender A to act; the breach itself is the trigger.

That is what makes the provision a domino mechanism. One missed covenant — sometimes a technical, non-payment one — can place every agreement containing a cross-default into default simultaneously, giving each counterparty its full menu of remedies at once.

Cross-acceleration: the buffered version

A cross-acceleration clause triggers later in the sequence: only when the other lender actually acceleratesits debt — declares the full balance immediately due — does this agreement go into default. A breach that Lender A waives, negotiates around, or simply tolerates never reaches Lender B.

The practical effect is a buffer. Under cross-default, every counterparty can pile on at the first breach anywhere. Under cross-acceleration, a problem spreads only after one creditor has taken the serious, visible step of calling its loan. Negotiated versions of financing documents commonly convert cross-default provisions to cross-acceleration for exactly this reason; how acceleration itself works is covered in our acceleration clause explainer.

Where these clauses show up

Loan agreements and credit facilities — the classic home, linking a borrower's facilities with one lender or across lenders.
Promissory notes and equipment financing — often cross-defaulted to the borrower's other obligations to the same lender.
Commercial leases — a lease can be cross-defaulted to another lease with the same landlord, or to a franchise or license agreement tied to the space.
Merchant cash advances and stacked financing — where multiple advances exist, cross-default language can make one remittance problem every funder's problem at once.

The terms that widen or narrow the trigger

Threshold amounts. Negotiated versions commonly apply the clause only to defaults on debt above a stated dollar threshold, so a small trade dispute cannot trip a major facility. Where the threshold sits — and whether one exists at all — is one of the first things to check.
Which obligations are covered. All indebtedness, only debt to the same lender, only material agreements, or a listed set. Broad drafts sweep in affiliates' and guarantors' obligations too.
Payment defaults vs. any default. Narrow drafts trigger only on payment defaults; broad ones trigger on any breach, including technical covenant misses.
Cure periods and disputes. Whether the clause waits out the other agreement's notice and cure period, and whether obligations being contested in good faith are carved out.
Mutuality. These clauses are almost always one-way — the lender or landlord holds the trigger, not the counterparty.

How the two read side by side

The drafting difference is small enough to miss: "a default under any other agreement" versus "acceleration of any other indebtedness." The first spreads a problem at the moment of breach; the second only after another creditor escalates. Documents carrying broad, threshold-free cross-default language across multiple obligations are commonly reviewed by counsel before signature, because the clause's reach is set by definitions that sit far from the clause itself. What you do with that information is your call.