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COVID-19: The pandemic’s potential effects on financial covenants

COVID-19: The pandemic’s potential effects on financial covenants

As the COVID-19 pandemic continues to send shockwaves worldwide, the economic disruption has the potential to affect financial covenants within existing loan agreements. Now is the time to carefully review loan documents to determine to what extent, if any, the pandemic and subsequent declines in business could have on your ability to remain compliance with those covenants.

Herbein can assist you in taking steps to address your existing credit relationships and navigate through this difficult period.

Here are some key issues related to financial covenants you should consider carefully as you navigate this crisis
If your business has been adversely impacted due to the pandemic, it could cause you to violate existing loan covenants that are in place. Consider monitoring your existing covenants according to the loan documents your business is currently operating under – and:

If you think you will encounter difficulty meeting these covenants, reach out to Herbein or your banker directly to discuss the following:

    • Short term waiver of covenants
    • Short term amendments of covenants
    • Renegotiate existing covenants in place

Conversations with bankers should be proactive and placed prior to violating the existing agreements in order to avoid waiver fees or potential issues with current financing in place.

While each business must carefully consider its unique circumstances and risk exposure, your Herbein professional is available to provide guidance during these turbulent times.

Article contributed by Josh Pollet. For additional information email us at info@herbein.com

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Herbein is responding to the COVID-19 (Coronavirus) pandemic with our Coronavirus Resource Center, which provides regularly updated information, answers to frequently asked questions and other resources to help during this global health crisis. Continue to check back for more updates in the coming weeks.

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