Financial covenant: Difference between revisions
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A clause in a loan agreement that commits the borrower to operate within predefined financial constraints. | A clause in a loan agreement that commits the borrower to operate within predefined financial constraints. | ||
Revision as of 22:12, 25 August 2013
Loan documentation.
A clause in a loan agreement that commits the borrower to operate within predefined financial constraints.
For example, an interest cover covenant might state that interest cover will be no less than 3 times; the borrower promises that the ratio will always exceed the set figure.
Breach of a financial covenant would normally constitute an event of default.
