What issues have you faced most often when trying to negotiate covenants in a loan agreement? Do you find that many of your negotiations are about the tension between maintaining appropriate limits vs providing sufficient flexibility for the business? Do specific issues arise in setting baskets for other debt, liens and investments? Permitting acquisitions? Dealing with subsidiaries? Agreeing on appropriate levels for financial covenants?

For the borrower, it's often the case that a large part of the process involves thinking through what the company needs in order to maintain and grow its business. This includes figuring out what the company will need during the entire life of the loan - looking ahead up to three or even five years and taking an educated guess.

On the other side of the table, the lenders need to know that things at the company won't change in a way that adds an unacceptable level of risk - for example, that the company will maintain reasonable financial performance and won't get rid of revenue producing assets (well, at least without paying down the loan).

If, for example, the borrower wants the ability to make significant acquisitions during the term of the loan, but the lenders think that for this company the acquisitions would create an unacceptable level of risk, these two differing viewpoints can lead to lengthy discussions. If all goes well (as is often the case), these negotiations result in creative solutions being crafted that meet the needs of all the parties. At the end of the day, there may be a few things can't be determined in advance that are set aside for later, with the lenders saying that the borrower should request consent if the anticipated event ever does occur. But usually the parties try to keep as many items off this list as possible.