What Is an Acceleration Clause?

Definition: Requires a borrower to repay all of an outstanding loan if certain requirements are not met.

Also called an acceleration-of-maturity provision, or simply “acceleration on default.”

What this clause actually does

An acceleration clause converts a schedule of manageable payments into a single demand for everything still owed. Normally you owe an instalment each month. When a trigger event happens and the lender accelerates, you owe the entire remaining principal at once — usually plus accrued interest, and often plus fees and collection costs.

It shows up wherever money is paid over time: loan notes and promissory notes, equipment finance and leases, seller financing, commercial property leases, franchise agreements, and settlement agreements paid in instalments. It is also the step that unlocks everything else. Acceleration is typically what makes the whole debt “due,” which is what lets a lender pursue collateral, call on a guarantor, or charge default-rate interest. On its own it looks like paperwork. In sequence, it is the switch.

Where it bites

The trigger list is almost always wider than “you missed a payment.” Read it as the operative part of the clause, because it is:

• Any late payment — sometimes a single day late, with no grace period stated.
• Breach of any other covenant — a missed financial statement, a lapsed certificate of insurance, a financial ratio you slipped under for one quarter, a reporting deadline. An administrative slip and a genuine inability to pay can sit in the same list with the same consequence.
• Cross-default — a default under a different agreement, sometimes with a different lender entirely, counts as a default here.
• Subjective triggers — wording like “material adverse change,” “if Lender deems itself insecure,” or “any event that in Lender's judgment impairs the prospect of repayment” hands the decision to the other side with no defined test.
• Structural events — change of control, transfer of assets, a new lien, insolvency proceedings, the death of a principal.

What to negotiate

• Narrow the trigger list. Ask for acceleration on payment default only, with other breaches handled as ordinary breaches with ordinary remedies.
• Written notice before acceleration. Acceleration that happens silently, with the first signal being a demand letter, removes any chance to fix a bookkeeping error.
• A cure period after notice — and a longer one for non-monetary breaches, which usually take longer to fix than a wire transfer does.
• Make it elective, not automatic. A clause where the lender may accelerate by written notice is very different from one where the debt becomes due automatically on a default.
• Reinstatement. If you cure after acceleration, the original schedule resumes. Without this, curing does not undo the acceleration.
• Materiality qualifiers on covenant breaches, so a trivial slip is not the same as a real one.
• Cut or cap cross-default — limit it to material defaults on debt above a stated threshold, rather than any default on anything.
• Carve out good-faith disputes about how much is actually owed, so a billing disagreement cannot be escalated into a default.
• Check what stacks on top. Ask explicitly whether default interest, a prepayment penalty, or collection fees apply to the accelerated amount. A prepayment penalty charged on a balance you were forced to repay early is worth finding before you sign, not after.

What a reasonable version looks like

A version most parties can live with usually has these features: acceleration available on payment default; written notice to a named contact; a stated cure window, with a longer one for non-monetary breaches; materiality qualifiers on covenants; acceleration exercised at the lender's option in writing rather than automatically; cross-default limited to material defaults above a threshold; and a reinstatement path if you cure. The specific lengths and thresholds that are normal vary a great deal with the size of the deal and who is taking the risk, so treat the structure above as the checklist, not any particular number.

What to push back on hardest

• Automatic acceleration with no notice and no cure period.
• “Any breach of any provision of this agreement” as a trigger.
• Subjective triggers the lender alone judges, with no defined standard.
• Acceleration stacked with a prepayment penalty on the accelerated balance.
• Acceleration bundled with a waiver of notice, a waiver of your defences, or a confession-of-judgment style provision. Those are separate concessions travelling under one heading, and each deserves its own conversation with a lawyer.
• Broad cross-default that lets an unrelated dispute with an unrelated counterparty collapse this facility.

Questions worth asking before you sign

• List every event that lets you accelerate. Is that list exhaustive?
• Do I get written notice first, and how many days do I have to cure?
• Is acceleration automatic, or do you have to choose it?
• If I cure after acceleration, does the schedule resume?
• Does a default under another agreement trigger this one?
• What interest rate applies after acceleration, and does a prepayment charge apply?
• What collateral becomes available to you, and who else becomes liable?

Related clauses

• Guaranty clause
• Liquidated damages
• “Time is of the essence”

Not legal advice. What's My Contract is not a law firm, and this page is general information about how a clause of this type is usually written — not advice about your contract, and not a statement of the law in any particular place. How a clause is read, and whether it can be relied on, depends on where you are, what the rest of the agreement says, and facts a general explainer cannot know. Before you sign, refuse, or act on any clause, have a lawyer licensed in your jurisdiction read your actual document.