Debt Covenants
Debt covenants are agreements between a borrower and a lender that outline certain terms and conditions that the borrower must adhere to in order to avoid defaulting on the loan. These covenants typically include restrictions on the borrower's ability to take on additional debt, requirements for maintaining a certain level of financial performance, and provisions for the lender to take action if the borrower fails to meet these obligations. Debt covenants are designed to protect the lender's investment and ensure that the borrower is able to repay the loan in a timely manner.