- Lease arrangements – Landlords may be willing to accept a temporary reduction in rent rather than risk losing a good, long-term tenant, and otherwise reliable income stream, altogether. This can usually be accomplished by a simple amendment to the lease agreement.
- Debt covenants – Companies that have credit facilities often are subject to debt covenants in favor of the lender that are tested periodically. Typical debt covenants that could be violated in times of financial crises include minimum financial tests, or ratios, based on a company’s income, assets, working capital, net worth and equity. Covenants that consist of operational milestones could be impacted as well. It’s good practice for companies to approach their lenders and seek amendments (or temporary waivers) to their covenants before those covenants are tripped, rather than afterwards, when the company is in default.
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