Loan covenants are promises made by the borrower that certain acts will be performed and others will be avoided.

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Loan covenants are indeed promises made by the borrower to perform certain actions and refrain from others. These promises are often included in loan agreements to ensure that the borrower will maintain certain financial ratios or meet specific performance targets. Breaching a loan covenant can result in severe consequences, such as defaulting on the loan or triggering penalties or fees.

Loan Covenants Are Promises Made by the Borrower That Certain