Covenants restricting the use of funds for dividend payments,share repurchases,capital expenditures,and other business purposes are included so the creditor has greater assurance that cash will be available to make principal and interest payments when due.

Question

Quizplus · Accepted Answer

Covenants restricting the use of funds for certain purposes are commonly included in loan agreements to ensure that the borrower has sufficient cash flow to make debt payments. This gives the creditor greater assurance that they will be repaid on time.

Covenants Restricting the Use of Funds for Dividend Payments,share Repurchases,capital