Why acceleration clause matters to a first-time founder
An acceleration clause can turn affordable monthly repayments into an immediate demand for everything still owed. Know exactly what triggers it. A missed payment, broken loan promise, insolvency or change of company control without permission could create a sudden cash crisis.
Examples of acceleration clause
A company has a $250,000 loan to repay over three years. The contract says the lender may demand all remaining loan and interest after a missed payment that the company does not fix. If the company misses a payment and does not pay it within the stated time, the lender can use the clause.
Common misunderstanding
Acceleration does not always happen automatically after every small breach. The contract may let the lender choose, require a warning or give the borrower time to fix the problem. The lender must still follow the contract and the law. Whether the clause can be enforced, and what the lender can do, depends on the contract and country.
When to use it
Review acceleration clauses before signing a loan, lease or other payment plan, and again if you may break the agreement. Where possible, negotiate clear triggers, warnings and time to fix problems. If the amount matters to the business or the lender threatens acceleration, speak to a lawyer qualified in that country.