Affirmative Covenant
Corporate Credit Analysis glossary · Credit Agreements & Covenants
Definition
A covenant requiring the borrower to do something (e.g., maintain insurance, provide financial statements, comply with laws).
Affirmative Covenant in plain English
A covenant is just a promise a borrower makes in a loan agreement, and an affirmative covenant is the "you must DO this" kind. These are the housekeeping rules that keep the borrower responsible — like keeping the business insured, sending the lender regular financial statements, and obeying the law. It's similar to a landlord requiring a tenant to keep the utilities on and hand over proof each month: nothing dramatic, just the ongoing chores that reassure the lender everything is being run properly.
Practice Affirmative Covenant
Which of the following is considered an 'Affirmative Covenant'?
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