# First Payment Default

Canonical URL: https://fundmyequipment.com/learn/glossary/first-payment-default/
Last modified: 2026-05-29T19:39:17+00:00
Type: efin_glossary

## Summary

When borrower misses the first scheduled payment. Red flag for fraud or misrepresentation.

## Content

First-payment default (FPD) is when a borrower fails to make the first scheduled payment on a newly-funded loan. Lenders treat FPDs as a separate, higher-severity category of default because they suggest either fraud, immediate post-funding financial distress, or fundamental qualification issues.
Why first-payment defaults matter

Fraud signal: a borrower who got financing under false pretenses and didn't intend to pay
Underwriting failure: the underwriting model missed signs of distress that became immediately apparent
Equipment misuse: the equipment may have been resold or moved without lender consent
Lender losses: FPD loans rarely have any equity to absorb loss; the lender starts deeply underwater

How lenders treat FPDs

Immediate escalation to fraud team and recovery
Aggressive repossession effort
Investigation of fraud (could involve law enforcement if intentional misrepresentation found)
Used as a feedback signal to underwriting algorithms

Common FPD causes

Borrower lost a major customer or revenue source between application and funding
Identity fraud (someone applied as a real business but wasn't affiliated)
Application misrepresentation (revenue, business existence, or credit overstated)
Equipment scammers (apply for financing on a fake equipment sale, divert the funds)
Buy-and-flip schemes (acquire equipment with financing, sell it for cash, walk away)

For borrowers
If you genuinely cannot make your first payment due to circumstances that arose after funding:

Contact the lender immediately, before the first payment is due
Provide documentation of the change (lost customer letter, medical event, business interruption)
Propose a workout: deferred first payment, partial payment, extended grace
Many lenders will work with borrowers in genuine hardship, even on a first payment

What NOT to do:

Avoid the lender's calls (the FPD will become a fraud case faster)
Move or sell the equipment
Ignore the situation hoping it resolves