Loan Covenants
Loan covenants are specific terms and conditions that borrowers agree to adhere to when taking out a loan. These covenants are designed to protect the interests of the lender by outlining certain requirements that the borrower must meet in order to maintain the loan agreement. Loan covenants can include restrictions on the borrower's financial performance, such as maintaining a certain debt-to-equity ratio or meeting specific revenue targets. Failure to comply with these covenants can result in penalties or even default on the loan.