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Impact of SBA PPP loans on loan covenants

Loan agreements typically contain three types of covenants:

1. Negative loan covenants – Borrower may not . . .

2. Affirmative loan covenants – Borrower promises to . . .

3. Financial loan covenants – Financial metrics tied to a borrower’s revenue, expenses, and debt

Loan agreements usually provide that the occurrence of a breach of a covenant constitutes an event of default, triggering a lender’s right to exercise remedies, increase interest rates, accelerate the due date of payments, and take other actions. Read more…