Final answer:
Lenders use covenants in loan agreements to safeguard against borrower default. Collateral and cosigners are also methods to secure a loan.
Step-by-step explanation:
Lenders often place restrictions or constraints on a firm to protect their interests when issuing a loan. These are called covenants, which are conditions specified in loan agreements to reduce the risk of default on the part of the borrower. Collateral, on the other hand, is something valuable — often property or equipment — that a lender would have a right to seize and sell if the borrower does not repay the loan. Additionally, a cosigner is another individual or firm who legally pledges to repay some or all of the money on a loan if the original borrower does not.