Financial covenant

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Revision as of 08:35, 9 October 2013 by imported>Doug Williamson (Category added 9/10/13 and spacing)
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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.


See also