Loan Covenants

Loan Covenants Course Overview

In this Loan Covenants course, we will demonstrate how the loan covenants are used in the lending process. 

We will start this course by defining covenants and discussing how they benefit both the lender and the borrower. We will then compare different types of covenants and discuss what a credit analyst should do in the event of a covenant breach.

After that, we will discuss key financial covenant ratios such as total liabilities to equity ratio (debt to equity), debt service coverage ratio (DSCR), working capital ratio, and debt to EBITDA ratio. We will explain what these ratios are, how to calculate them, and how they are used in evaluating a company's creditworthiness. 

Finally, we will complete a case study where you need to build a covenant model in Excel. We will calculate a company's key credit metrics based on the historical and forecast financial statements. We will compare these metrics to the covenants that are set for this business and are suitable for the loan.

Loan Covenants Learning Objectives

Upon completing this course, you will be able to: 

• Understand the key concepts of covenants in a loan agreement
• Explain different types of loan covenants
• Calculate key financial covenant metrics
• Use a financial model in Excel to model financial covenants

Loan Covenants Is a Required Course of CFI's CBCA® Program

CFI's Certified Banking & Credit Analyst (CBCA)® Program offers skills including credit evaluation, documentation, and review procedures. For beginners to advanced users, the CBCA® program is designed to help you become a world-class credit analyst. 

Who Should Take This CBCA® Course?

This Loan Covenants course is perfect for any aspiring credit analyst working in insurance, underwriting, rating agencies, commercial lending, corporate credit analysis, and other areas of credit evaluation.