Loan covenants

Question

Loan covenants

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Loan covenants are terms and conditions set by a lender to ensure that the borrower meets certain obligations and that the loan is repaid on time. One common type of covenant requires the borrower to maintain certain financial characteristics, such as a minimum debt-to-equity ratio or a minimum level of cash flow. This ensures that the borrower remains financially stable and is able to repay the loan. Collateral is the property or assets that are pledged as security for the loan, but it is not a type of covenant. The lender's responsibilities are not typically included in loan covenants.

Loan Covenants