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Warranty versus covenant
A covenant is a promise to do or not do something over time. A warranty is an assertion of fact true at signing — for example, that the accounts are accurate or there is no undisclosed litigation. If it is false, the other party can claim damages.
Managing the risk
Give warranties only where you are confident, and disclose known issues against them (a disclosure letter) to limit exposure. In a business sale especially, warranties are a major source of post-deal liability.
What it means for you
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.
Frequently asked questions
What happens if I breach a warranty?
The other party can claim for the loss caused by the false statement. An inaccurate warranty in a finance or sale deal is a direct route to liability.
How is a warranty different from a covenant?
A warranty is a statement of fact true at signing; a covenant is an ongoing promise. Breaching a warranty means it was false; breaching a covenant means you failed to keep a promise.
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Read →Funding for UK limited companies
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