2 min read
Definition
A negative pledge is a covenant in a loan agreement under which the borrower undertakes not to grant security over its assets to any other lender while the loan is outstanding, or not without the existing lender's consent.
In plain terms
It stops you quietly promising the same assets to someone else, which would push the current lender down the queue if things went wrong.
Why it matters for your company
Signing one can limit your ability to raise further secured borrowing later. Read the small print of any facility for it. See loan covenants.
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