Capital Insights: Why Covenants Matter – Part 1 May 31, 2016

Part 1: Capacity (A Two-Part Series)

Financial covenants (or ratios) are to lenders what blood pressure, cholesterol and BMI are to doctors; they are measures of overall corporate health. Many entrepreneurs don’t understand why these covenants matter, or what their lender is trying to accomplish by testing them. More importantly, they don’t invest the time to understand and negotiate a covenant structure that accurately measures what matters to their business.

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