Business Finance | Have you met the Scavenger’s Daughter?

financeImpressing your bank less important than being able to hit targets

The Scavenger’s Daughter? Might be the name of a lost Dickens novel … or an indulgent misnomer for a  the infamous rack that not only stretched but crushed its victims during the reign of King Henry VIII.
Thumbscrews, pilliwinks, breaks and the tormento de toca were other methods used to punish those that broke their “covenant” with the King.
Fortunately, those punishments are relegated to history’s ash heap … at least I’m pretty sure that banks aren’t using any of these default provisions.

Compliance with financial covenants

Compliance with financial covenants, however, has never been more important. Today, banks have an arsenal of covenant choices that are used as an early warning system to alert participants to potential problems that may jeopardize their financial well-being.
It’s important to recall that covenants are based upon the forecast you have furnished to the bank. So, while your forecast describes your best judgment about the realistically achievable scenario you expect, it also sets the boundaries for the bank’s expectations.

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