Covenant Control

Covenant control refers to the agreements or conditions set within a loan or debt contract that the borrower must adhere to, such as maintaining specific financial ratios or restrictions on certain actions. These covenants help lenders ensure the borrower remains financially healthy and reduces the risk of default. If the borrower breaches these conditions, the lender may have options like demanding immediate repayment or renegotiating terms. Essentially, covenant control acts as a safeguard for lenders, ensuring that borrowers operate within agreed financial boundaries to protect their investment.