Find every promise your loan agreement makes you keep
Covenants are the ongoing promises a borrower makes for the life of a loan: to deliver financial statements, to keep certain ratios within limits, and not to take on more debt, sell key assets or pay dividends without consent. Ask Search+ to list the covenants in your agreement, then ask how each financial covenant is defined and tested, and read the cited text that sets the limit.
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Last updated October 2026
How to review loan covenants with Search+
- Upload the agreement and the compliance certificate form
Add the loan agreement and, if there is one, the form of compliance certificate from the schedules. The certificate shows how the covenants are reported in practice.
- Ask for each covenant family on its own
Ask about information covenants, financial covenants and negative covenants as separate questions. Each family sits in its own part of the agreement and answers stay easier to check.
- Trace the definitions behind the numbers
Financial covenants depend on defined measures of earnings, debt or cash. Ask how each measure is defined so its citation is in front of you before you rely on a figure.
Questions about loan covenants
Which financial covenants does this agreement contain, and on what dates are they tested?
What does the negative covenant allow in terms of additional debt or liens?
Can the borrower pay dividends or distributions, and on what conditions?
Which financial statements and certificates must be delivered to the lender, and when?
What happens if a financial covenant is breached, and is there an equity cure?
What to look for in loan covenants
Positive covenants require actions, negative covenants forbid actions without consent, and financial covenants set measurable limits. Commercial loan agreements often contain all three; simpler loans may have few or no financial covenants.
A ratio limit only means something together with the definitions of its parts, including the add-backs allowed. Two agreements with the same limit can be very different.
Negative covenants usually come with permitted amounts or exceptions. They are where flexibility lives, so ask about them by name.
Covenants may be tested quarterly, on drawdown or on a rolling basis. Ask exactly when and over what period each one is measured.
Ask across the full document and Search+ can combine the covenant, its definitions and its consequences in one answer, citing each part.
Covenant wording and what to ask next
| Wording you may see | What it usually signals | A follow-up question |
|---|---|---|
| "shall not incur any Indebtedness" | A debt restriction | Which debt is permitted under the exceptions? |
| "Leverage Ratio shall not exceed" | A financial covenant | How is the ratio calculated and on which dates? |
| "Permitted Distributions" | A defined exception for payouts | What conditions apply before a distribution is allowed? |
| "deliver within ... days after the end of each" | A reporting covenant | Which documents and by when? |
| "equity cure" | A right to fix a breach with new equity | How many times can the cure be used? |
| "negative pledge" | A ban on granting security to others | Are any existing liens permitted? |
What are loan covenants?
Loan covenants are the promises in a loan agreement about what the borrower will do, will not do and will maintain while the loan is outstanding, usually backed by the lender's default rights.
Questions about loan covenants
Can Search+ list all the covenants in my loan agreement?
Will it show me how a financial covenant is calculated?
Can it tell me what a covenant breach leads to?
Can I check covenants against a lender's later amendment?
Is this financial or legal advice on covenant compliance?
Know what you promised the lender
Start a workspace, upload the loan agreement, and ask about each covenant.
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