What is the importance of contractual covenants to money lenders?

      

What is the importance of contractual covenants to money lenders?

  

Answers


Dana
Covenants allow the lenders to control the activities of the borrower to protect themselves for the agency problem between the lenders and the loan created by the loan. Without these provisions, the borrower could take advantage of the lender by investing in riskier projects without compensating lenders with high interest rate on their loans

Dana05 answered the question on July 18, 2019 at 19:23


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