Financial covenants are used as a tool for lenders to measure a borrower’s health and to test their ability to incur additional debt. Borrowers and lenders alike negotiate financial covenants to ensure it works both for the company’s ability to report and comply with the covenant thresholds and for the lender’s ability to accurately monitor the borrower’s health. One common financial covenant is the debt to EBITDA ratio. Learn more about that ratio and negotiating points below. For further information, please reach out to Mehak Rashid.

Prepared in collaboration with Finley Technologies, Inc.