Glossary · The loan itself
Financial covenant
In short
Specific conditions in your loan agreement require the business to maintain certain financial ratios or performance levels. Failing to meet these can trigger a loan default.
What it means in a deal
Your SBA loan agreement will include covenants like maintaining a minimum Debt Service Coverage Ratio (DSCR) or specific liquidity levels. Understand these thoroughly, as breaching them can put your loan in default, even if payments are current. Monitor your business's financial performance against these metrics.
Official sources
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Financial covenant
- What specific financial covenants or conditions must be included in a seller note on full standby for a 7(a) acquisition loan?
- What if my personal financial statement shows low liquid assets?
- Are SBA 7(a) loans exclusively for businesses with financial difficulties?
- What if my business is new and has no financial history?
- Does misrepresenting financial information on the SBA application automatically kill approval?
- How does my personal financial history affect SBA 7(a) loan approval?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
See which SBA lenders would fund your deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to approve a 7(a) like yours and flag what trips up approval.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.