Coronavirus: Impact on financing agreements

The business financing sector is among those that could suffer the greatest impact due to the economic crisis that is expected to be the inevitable result of the global COVID-19 pandemic.

In fact, the paralysis of economic activities will undoubtedly have a negative impact on the liquidity of companies that have to make regular payments under financing agreements. These liquidity problems will seriously harm the ability of companies to meet their obligations on time. This is likely to lead to breaches of contract that could be grounds for terminating the agreements and for the acceleration of any outstanding obligations, which would have an even more serious effect on the economic and financial situations of companies.

The current situation is an exceptional one that is not always adequately addressed in the financing agreements themselves. Therefore, companies and financial institutions should analyse the wording of their agreements, so they are in a better position to plan the actions to deal with any issues that arise under them.