{"ok":true,"canonical_url":"https://dealroom.so/glossary/financial-covenants","api_url":"https://dealroom.so/api/public/glossary/financial-covenants","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-covenants","term":"Financial covenants","group":"The loan itself","definition":"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":"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.","url":"https://dealroom.so/glossary/financial-covenants","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":"dscr","term":"DSCR","url":"https://dealroom.so/glossary/dscr"},{"slug":"working-capital","term":"Working capital","url":"https://dealroom.so/glossary/working-capital"},{"slug":"loan-agreement","term":"Loan agreement","url":"https://dealroom.so/glossary/loan-agreement"},{"slug":"loan-default","term":"Loan default","url":"https://dealroom.so/glossary/loan-default"}],"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":"How does a lender ensure the loan covenants in the authorization are accurately reflected in the loan documents?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-ensure-the-loan-covenants-in-the-authorization-are-accurately-reflected-"},{"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"}]},"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 covenants","url":"https://dealroom.so/glossary/financial-covenants","source_type":"DealRoom Data"}}