What Happens When A Business Starts Missing Debt Covenants?

When ownership in a business changes hands, most acquirers finance a portion of the purchase price with debt from a senior lender. For many businesses, this could be their first time with significant debt on their balance sheet. These loans are subject to debt covenants, agreements between the business and the lender that the company will operate within the rules established by the lender and based largely on the company's profitability. But what happens when a business has a down year and starts to miss covenants? Kelly Lamirand of Key Bank joined us to discuss the purpose of debt covenants and what happens when a company fails to meet its obligations.
MCM Capital Partners is a Cleveland, Ohio based lower middle market private equity firm focused on partnering with niche manufacturers and value added distributors generating over $10 million in revenues and between $2-$8 million in EBITDA. We aim to drive value creation and top line growth at our portfolio companies through deep industry experience, operational expertise and business development support.
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