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Finance: What is a debt covenant? 4 Views
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What is a debt covenant? Covenants are added clauses to a loan agreement that are dictated by the lender that the borrower has to agree to in order to close a loan transaction. Covenants can include, but are not limited to, items like requiring adequate insurance coverage, keeping debt ratios under a specific number, compliance with local zoning laws, and a host of other circumstances unique to the transaction that the lender may perceive as potentially detrimental to the borrower’s ability to service the loan.
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