Banking covenants

Banking covenants are a crucial part of any bank loan agreement. A loan agreement in the form of a covenant will include a series of undertakings, the breaching of which will make the loan repayable immediately. The breaching of an undertaking will also be an event of default. In this situation, the bank assumes much greater financial control over the business (for example, it can prevent the payment of any dividends).

 

reference: Business Studies / Accounting. Accounts & Finance Glossary. Jim Riley BA(Hons) MBA FCA // tutor2u

Tags: