Brinker Simpson's Accounting Advisory Services team provides a wide range of transactional support which simplifies accounting issues of deals of all kinds. Our reputation is built on our dedication to quality service and technical excellence. We work together with you to help you understand the implications of contemplated business and accounting decisions.


A debt or loan covenant is an agreement you have with the bank regarding your loan. Boiled down, there are three variations of debt covenants:

  • Affirmative covenants require that you do certain things like submit financial statements to the bank and/or carry liability insurance.
  • Negative covenants preclude you from doing certain things, such as taking on additional debt or selling assets without your lender's approval.
  • Financial covenants require that your company maintain certain liquidity or performance ratios. For example, your company may have to maintain a minimum net worth or generate a certain level of pre-tax profits.

It is important to know what obligations you must fulfill so that you are not in violation. We have found several cases where clients seem to have been caught off guard by our findings. It is important that you monitor the status of your company’s loan covenants, if not monthly, at least quarterly.

If you know you are going to violate your loan covenant, it is critical to talk to your lender and your accountant as soon as possible. Like anything else, dealing with it head-on will garner the best result.

If you have questions or need assistance, please contact our office at 610.544.5900.