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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. Credicorp 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
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.