Client loginPartners
Talk to an advisorGet matched
Funding SolutionsSBA LoansTerm LoansLine of CreditWorking CapitalEquipment FinancingInvoice FactoringCommercial Real EstateEcommerce Funding1099 & Gig FundingHELOC for Business
Funding by GoalMake payrollBuy inventoryExpandBuy equipmentBuy a businessRefinance debt
Who We FundAll industriesFind your state
ResourcesGuidesCalculatorsWhat can I qualify for?GlossaryFAQs
CompanyAbout usHow it worksCareersContact

Glossary

What is Covenant?

A covenant is a condition in a loan agreement that the borrower agrees to follow for the life of the loan. Affirmative covenants require certain actions, such as providing annual financial statements or maintaining insurance. Negative covenants restrict actions, such as taking on additional debt or selling major assets without permission. Financial covenants require meeting measures like a minimum debt service coverage ratio. Breaking a covenant can be treated as a default even if payments are current.

Example

A bank loan requires the borrower to maintain a debt service coverage ratio above a set level, tested annually.

Related funding

Term Loans: A lump sum with fixed payments for big, planned moves.

Related terms

Commercial MortgageDaily and Weekly PaymentsDBA (Doing Business As)All terms

Questions about an offer? Your advisor will explain every term.
See my options →