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What are the additional covenants in term loan agreement to protect lenders?
The additional covenants in term loan agreement to protect lenders are:
1) After the finalization of contract, borrowing company will have to submit the copy of Annual accounts to the lender.
2) The assets purchased will be properly maintained and insured by the borrowing company.
3) If the loan amount is big then the lender may have a representative on the Board of Directors of the company.
4) To ensure the liquidity position of the borrowing company, the agreement may stipulate the following:
a. No dividend will be paid without the consent of the lender.
b. No long term loans to the officers or directors of the company.
c. No investments outside the corporate securities.
d. No redemptions of the debt before the maturity.
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