2 min read
Definition
A bank covenant is a term in a loan agreement the borrower must satisfy — a financial covenant (like a minimum DSCR) or a restrictive covenant limiting actions.
In plain terms
It is a rule attached to the loan. Break it and the bank can act — even when every repayment has been made on time.
Why it matters for your company
Monitor covenants monthly via your management accounts and keep headroom. Credit Corp keeps core products covenant-light. See event of default.
Related reading
Covenant
A covenant is a promise or condition written into a loan agreement that the borrower must keep to for the…
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Restrictive covenant (finance)
A restrictive (negative) covenant limits what you can do while a loan is outstanding — extra borrowing,…
Read →Event of default
An event of default is any breach that lets a lender call in the loan — a missed payment, a broken covenant,…
Read →Headroom — Business Finance Glossary
Headroom is the margin between a borrower's actual financial performance and the threshold at which a…
Read →Funding for UK limited companies
Credit Corp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.