Provisions included in a loan agreement that establish the financial management standards by which a lender will agree to extend financing to a business. For example, a bank may require that a company maintain specific debt to asset ratios on its balance sheet.
Related information about financial covenants:
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Financial covenants are frequently ratios that the borrower is required to stay above or ... Financial covenants often limit the borrower's purchase of new assets , ...
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Financial covenants enforce minimum financial performance measures against the borrower, such: The company must maintain a higher level of current assets ...