Using the Dry Supply case study for an example of loan documentation process and related requirements, suppose
that Dry Supply and the bank agreed to the following terms:
· Borrower: Dry Supply Inc.
· Amount $60,000
· Purpose: purchase 3 vans
· Rate: 6%
· Term: 5 years
· Repayment: 5 year amortization
· Guarantee: Kaitlyn and Emily Nielson
· Other conditions: No mergers or acquisitions without bank consent, debt-to-worth ratio will not exceed 2.5x, monthly internally prepared financial statements, annual reviewed financial statements prepared by accounting firm
List some affirmative and negative covenants that can be applied to Dry Supply.
An affirmative or positive covenant is
a clause in a loan contract that
requires a borrower to perform
Examples – Requirement to maintain