Financial Covenant

Financial covenant is a covenant requiring the borrower to maintain or satisfy a stated financial measure or threshold.

Why this matters to income investors

A financial threshold can flag stress before a missed payment.

How to use financial covenant in your research

Read the borrower or issuer disclosures for collateral, payment priority, covenant terms, and missed payments. Then check how a deterioration could reduce interest income or the value available to support future dividends.

This material is general education and information, not individualized investment, tax, or legal advice.