2 min read
Definition
A financial covenant is a term in a loan agreement requiring the borrower to maintain specified financial metrics — such as a minimum interest cover, a maximum gearing ratio, or a minimum net worth — tested at regular intervals.
In plain terms
It's a set of financial rules you agree to stay inside. If a ratio drifts past the limit, the lender knows early and can act — a breach even if payments are current.
Why it matters for your company
Understand and monitor any covenants before signing, so you're never caught out by a technical breach. See loan covenants.
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Gearing ratio
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Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.