Loan covenants are critical components of loan agreements, setting financial and operational boundaries for borrowers. They include affirmative covenants, which require specific actions like adhering to financial ratios, and negative covenants, which restrict activities such as incurring additional debt. Understanding these covenants is vital for businesses to navigate financial commitments and for lenders to safeguard their investments.
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1
Loan agreements include ______ that dictate how borrowers should manage their finances.
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2
A ______ covenant might prevent a company from acquiring more debt or selling key assets without the lender's consent.
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3
Dual purpose of loan covenants
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4
Loan covenants as a risk mitigation tool for lenders
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5
Loan covenants in borrower's strategic planning
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6
Loan covenants may impose conditions related to ______, ______, and ______ to suit the specific terms of the credit agreement.
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7
Negative covenants aim to protect the lender by restricting the borrower from ______, ______ without permission, or selling off important ______.
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8
Impact of long-term debt on loan covenants
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9
Role of asset collateralization in loan agreements
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10
Influence of industry risk on covenant strictness
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11
Loan covenants may require positive actions like keeping a minimum level of ______ or negative ones such as restricting ______.
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12
In loan agreements, the ______ of default is essential as it may lead to the lender demanding ______ of the loan.
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13
Credit Structure Components
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14
Loan Covenant Function
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15
Factors Influencing Covenant Strictness
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