{"ok":true,"canonical_url":"https://dealroom.so/glossary/financial-covenant","api_url":"https://dealroom.so/api/public/glossary/financial-covenant","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"financial-covenant","term":"Financial covenant","group":"The loan itself","definition":"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":"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.","url":"https://dealroom.so/glossary/financial-covenant","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"loan-agreement","term":"Loan agreement","url":"https://dealroom.so/glossary/loan-agreement"},{"slug":"dscr","term":"DSCR","url":"https://dealroom.so/glossary/dscr"},{"slug":"loan-default","term":"Loan default","url":"https://dealroom.so/glossary/loan-default"},{"slug":"compliance","term":"Compliance","url":"https://dealroom.so/glossary/compliance"}],"related_questions":[{"question":"What specific financial covenants or conditions must be included in a seller note on full standby for a 7(a) acquisition loan?","url":"https://dealroom.so/for-lenders/questions/what-specific-financial-covenants-or-conditions-must-be-included-in-a-seller-note-on-full-"},{"question":"What if my personal financial statement shows low liquid assets?","url":"https://dealroom.so/sba-loans/basics/what-if-my-personal-financial-statement-shows-low-liquid-assets"},{"question":"Are SBA 7(a) loans exclusively for businesses with financial difficulties?","url":"https://dealroom.so/sba-loans/basics/are-sba-7-a-loans-exclusively-for-businesses-with-financial-difficulties"},{"question":"What if my business is new and has no financial history?","url":"https://dealroom.so/sba-loans/basics/what-if-my-business-is-new-and-has-no-financial-history"},{"question":"Does misrepresenting financial information on the SBA application automatically kill approval?","url":"https://dealroom.so/sba-7a/questions/does-misrepresenting-financial-information-on-the-sba-application-automatically-kill-appro"},{"question":"How does my personal financial history affect SBA 7(a) loan approval?","url":"https://dealroom.so/sba-7a/questions/how-does-my-personal-financial-history-affect-sba-7-a-loan-approval"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Financial covenant","url":"https://dealroom.so/glossary/financial-covenant","source_type":"DealRoom Data"}}