A well-drafted covenant is to be more of a deterrent in normal times, as it serves to remind the borrower about the consequences of not honouring the loan contract. Such a contract would be the result of strong appraisal and monitoring systems that are put in place by a lender.
The appraisal would properly price the risk the lender is taking upon by extending a loan to a borrower. It would also involve proper understanding of the sector to which the loan is extended, including the vagaries and various risks that could potentially affect the projected cash flows of the venture that is being financed.