Explicit provisions in a loan agreement that prohibit the borrower from engaging in certain activities is called

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Restrictive covenants are explicit provisions in a loan agreement that prohibit the borrower from engaging in certain activities such as taking on additional debt or paying dividends. These covenants protect the lender's interests and reduce the borrower's ability to take actions that may jeopardize their ability to repay the loan. Credit rationing refers to a situation where borrowers are denied credit due to factors such as creditworthiness or collateral. Credit-risk analysis is the process of assessing the creditworthiness of a borrower, and adverse selection refers to a situation where borrowers who are most likely to default are the ones who are most likely to apply for a loan.

Explicit Provisions in a Loan Agreement That Prohibit the Borrower