Glossary · The loan itself
Financial covenants
In short
Conditions set by the lender that the business must meet periodically (e.g., maintaining a certain debt service coverage ratio or working capital level) to remain in compliance with loan terms.
What it means in a deal
These are common in SBA 7(a) loans and are designed to ensure the business remains financially healthy enough to repay the loan. You'll typically report these annually, providing your financials to the lender. Failing to meet a covenant can trigger a loan default, so understand them completely.
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 covenants
- What specific financial covenants or conditions must be included in a seller note on full standby for a 7(a) acquisition loan?
- How does a lender ensure the loan covenants in the authorization are accurately reflected in the loan documents?
- 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?
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.
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