Attempts: 3 Keep the Highest: 3/4 3. Loan covenants Aa Aa When lenders give loans to borrowers, they use security provisions and covenants that protect them from the risks involved in the loan agreement. Covenants impose limitations and restrictions on the borrower to mitigate the lender's risk. The weaker the credit standing of the borrower, the restrictive the loan covenants become. Which types of loans tend to have more security requirements? Longer-term loans Short-term loans Consider the following case: Nimna took a loan from the bank for her company. The loan agreement requires Nimna's company to retain management that the lender approves of. This case illustrates an example of Which of the following covenants in Nimna's loan represents a negative covenant? Limitations are placed on the amount of funds the borrowing company may invest in new property, plant, and equipment O The borrower cannot pledge their assets or factor their receivables to another lender. The borrower is required to pay the entire loan amount if they fail to make payments towards the loan. The borrower cannot pay dividends beyond a certain limit