Loan Covenant Best Practices

Loan Covenants Tighten Up shares some best practices to consider when talking to a lender:

• Negotiate and monitor ratios. – Track your key financial ratios monthly.
  
  
• Prepare to be audited. – Be aware of all the costs associated with providing audited financial statements.
  
  
• Watch out for a positive cash flow covenant.
  
  
• Get ready for new rate structures. – Many lenders now have a floor and are using the higher of prime or Libor.
  
  
• Be prepared for more stringent "personal guarantees."
  
  
• Know what's typical. – This section includes a great discussion of typical requirements (e.g. insurance, regular financial statements, corporate and guarantor's tax returns).