On this page▾
Picture this: your business has an investment credit at KBC and a revolving working capital facility at BNP Paribas Fortis. Cash flow tightens one quarter, and you miss a scheduled principal instalment on the KBC loan — €80,000. You call your KBC relationship manager and start working toward a solution. What you do not realise is that while that conversation is happening, BNP Paribas Fortis has already received the legal right to declare your revolving credit in default, freeze your undrawn commitments, and demand full repayment, even though you have never missed a single payment on that facility. That is the cross-default clause doing exactly what it was built to do.
What Is a Cross-Default Clause?
A cross-default clause sits in the events-of-default section of your credit agreement. It says that if you default on any other debt obligation, with any other lender, that fact alone constitutes a default under this loan too. The other lender does not need to have taken any action. The default at Bank A is, by itself, the trigger for Bank B to act.
The clause is standard in Belgian commercial lending, from large LMA-style agreements down to the proprietary SME templates used by KBC, BNP Paribas Fortis, ING Belgium, and Belfius. It sits quietly in the fine print until the moment it becomes the most consequential sentence in your entire banking relationship.
Why Your Bank Requires It
Belgian banks do not share real-time default information with each other: each lender relies on its own compliance certificates to monitor your health. The cross-default clause fills the gap: it ensures a problem at a competing institution automatically becomes every other lender's business too, giving each bank the simultaneous right to act the moment any single default occurs. The MAC clause performs a complementary function, giving the bank recourse against deterioration that does not rise to a technical default at any specific institution.
What It Means in Practice
According to NBB Balanscentrale credit data, approximately 85% of Belgian businesses borrow from more than one bank simultaneously: investment credits at one, working capital lines at another, leasing elsewhere. Each of those facilities likely carries its own cross-default clause, creating a web where a problem anywhere can bring down the whole structure at once. Each facility also typically contains an additional debt restriction — meaning a borrower who takes on new debt without consent risks triggering not just a breach under that covenant, but a cross-default cascade across the entire stack.
The trigger is not limited to payment defaults. Most clauses are drafted broadly enough to capture any event of default under your other agreements, including covenant breaches. So if you breach a leverage ratio at ING Belgium, even while ING is actively planning to grant you a waiver, the moment that breach becomes a technical event of default under ING's agreement, Belfius may already have the right to declare its own facility in default. The waiver ING intends to give you offers no protection under Belfius's cross-default clause.
The clause also interacts with Belgian insolvency law in ways that catch business owners off guard. Filing for judicial reorganisation (gerechtelijke reorganisatie) under Book XX of the Belgian Code of Economic Law is itself an insolvency event of default: a WCO filing can trigger cross-default clauses across your entire debt stack at the moment of filing, before you have presented any restructuring plan. Events such as a change of control that trigger an event of default at one bank are equally capable of pulling the cross-default trigger across all other facilities simultaneously.
Cross-Default vs Cross-Acceleration: A Critical Distinction
A cross-acceleration clause works very differently — and much more in your favour. Under cross-default, the clause fires the moment a default exists anywhere in your debt. Under cross-acceleration, it only fires if the other lender has actually accelerated: formally demanded early repayment. If your relationship manager at KBC informally indicates they will not push for repayment, and has not formally accelerated, a cross-acceleration clause at BNP Paribas Fortis has nothing to grab onto. You retain time to cure the problem before the contamination spreads. Under a cross-default clause, that time does not exist — even a technical breach that a reasonable lender would waive without a second thought is enough to pull the trigger.
What to Watch
Start with the materiality threshold. Belgian market practice for SME-level facilities places thresholds in the €50,000 to €100,000 range: the clause only fires if the defaulted obligation exceeds that amount. A zero-threshold clause, where any default regardless of size triggers the provision, is far more aggressive. Also check whether the threshold is per occurrence or aggregate: an aggregate threshold across multiple small defaults is much weaker protection.
Next, examine the scope. A broadly drafted clause may capture not just bank debt but also operating leases, trade payables, and tax arrears to the ONSS or Belgian tax authority. Tax payment difficulties are among the most common early-distress signals for Belgian SMEs, and a clause that reaches those obligations is considerably more dangerous than one limited to financial indebtedness alone. Also check whether the clause extends to affiliated entities: Belgian banks, including KBC and BNP Paribas Fortis, routinely draft cross-default to cover subsidiaries and, in group structures, sometimes the holding company as well. A default at one entity in your group can therefore trigger cross-default across facilities held by another.
Finally, check for a cure period carve-out: language stating the cross-default only fires after the underlying default has remained uncured past its applicable grace period. Without this, you can be in cross-default at one bank while still inside the cure window at another.
Where You Have Room to Negotiate
The most valuable change you can make is replacing cross-default with cross-acceleration. This is a recognised borrower-side negotiation ask, accepted in some transactions, particularly where you have more than one competing bank offer or a strong credit profile. Banks will resist, but resistance is not the same as refusal.
If cross-default stays in, push the threshold as high as you can, expressed on a per-occurrence basis. Limit the scope to financial indebtedness only, excluding leases and trade payables. And negotiate a cure period carve-out so your grace period runs out before the cross-default fires. None of these eliminate the clause, but together they reduce significantly the scenarios in which it bites.
The fastest way to see whether a Cross-default covenant — and every other condition — is in your term sheet is to let Credia read it for you. Upload the PDF and you get every covenant identified and explained, in plain language, in under two minutes.
Analyse your term sheetNew to term sheets? Read our term sheet guide.
Frequently asked questions
What is a Cross-default covenant?
A cross-default clause triggers a default under this loan if the borrower defaults on any other debt obligation — even with a different lender. Some clauses include a materiality threshold (e.g., defaults above €50,000 or €100,000); others trigger on any default.
What does a Cross-default covenant restrict?
Creates a domino effect: a single missed payment or covenant breach on one facility can cascade into defaults across all facilities with cross-default provisions. This accelerates the entire debt stack simultaneously.
Can you negotiate a Cross-default covenant?
Most covenant terms are negotiable at the term sheet stage, before the legal documentation is drawn up. With the Cross-default covenant, focus on the definition, the threshold, the testing frequency, and the cure period. Ask your relationship manager what flexibility exists, and have your accountant confirm the level is one your business can hold comfortably. Read every line.