Financial Covenant
/ˈfaɪnænʃəl ˈkʌvənənt/
Definitions
- (n.) A clause in a debt agreement requiring the borrower to meet specified financial metrics or restrictions to protect the lender’s interests.
The loan agreement included a financial covenant requiring the borrower to maintain a minimum debt service coverage ratio.
Forms
- financial covenant
- financial covenants
Related terms
See also
Commentary
Financial covenants are typically negotiated terms defining quantitative financial thresholds; drafters should ensure clear, measurable criteria to avoid ambiguity and disputes.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.