A loan covenant is a rule built into your loan agreement — something you promise to do, or not do, while you have the loan.
A loan covenant is a contractual condition in a loan agreement requiring the borrower to maintain certain standards or refrain from specified actions.
Breaking a covenant can put a loan in default even if payments are current, so it's important to know what your covenants require.
A covenant might require maintaining a minimum working capital level during the loan term.
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