Covenants are restrictions placed on firms seeking to obtain debt financing.They are intended to protect the interests of the lenders.

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Covenants are conditions and restrictions that lenders impose on borrowers to protect their interests and ensure that the borrower meets certain financial requirements. These restrictions can include limitations on asset purchases, dividend payments, and other financial decisions that could affect the borrower's ability to repay the loan.

Covenants Are Restrictions Placed on Firms Seeking to Obtain Debt