Covenant

It’s a condition of borrowing money from someone. So, for example, I might borrow $1million from you, but you tell me that I can only borrow a maximum of 10x my underlying profit. So, effectively, if my profit declines below $100,000 and I still have $1 million in debt, then you can take control of the company. Conversely, if my profit goes up to $500,000, then I am able to borrow up to $5 million (from you or someone else).