Covenant Lite Loans

Covenant Lite loans are a type of business loan that offers borrowers more flexibility by having fewer restrictions and fewer requirements to meet during the loan term. Unlike traditional loans, which impose strict rules on financial metrics and operational conditions, covenant lite loans provide fewer oversight provisions, making it easier for companies to access financing. This structure benefits borrowers with less risk of loan default triggers, but it can also increase lender risk because there’s less early warning if the borrower’s financial health deteriorates. These loans are common in competitive lending markets and among private equity-funded companies.