Covenant

A covenant refers to a contractual promise made by a borrower within a loan agreement. These covenants establish specific financial or operational conditions that the borrower must maintain throughout the loan term. These conditions, which can be either affirmative or negative, are designed to protect the lender by ensuring the borrower’s financial health and stability.

Loan management software plays a crucial role in mitigating risks, fostering transparent communication, and monitoring compliance with these covenants.