Covenant monitoring that re-tests every covenant from the borrower's own numbers, the day the certificate arrives
Every breach seen the day it happens, not at the annual review.
See one case, screen by screen ↓Software that tracks every covenant in a lender's loan book: it knows each borrower's reporting deadlines, collects the compliance certificates and financial statements, tests the financial covenants and raises breaches and late certificates. Covenant Monitoring adds agents that read the agreements, spread the statements and re-test every covenant from the borrower's own numbers.
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Forty-five days after quarter end, the compliance certificates come in by email — or they don't. A credit administration analyst chases the late ones, types each borrower's statements into a workbook kept by the relationship team, and works out leverage, fixed charge coverage and liquidity by hand. With dozens of borrowers due the same week, it is easy to accept the ratio the borrower's CFO certified.
The certificate is not the test. Whether an add-back counts, and whether it is capped, depends on the exact words of the agreement and its latest amendment. A certificate that applies the definition wrongly reads “in compliance” for months, a late certificate is itself an exception nobody logged, and the bank cannot see in one place which borrowers are a quarter away from a limit.
Estimated split for one quarter's certificate cycle, by hand and with the solution.
Six specialist agents collect, spread and re-test every covenant under the agreement's own definitions; the credit analyst confirms.
Halvorsen Industrial Coatings, a $38.5M borrower in Dayton, certifies its third-quarter covenants as met. Here is what happens next, screen by screen, in the working solution.
Third quarter 2026, Monday 16 November: 141 of 168 certificates are in and 140 were re-tested from the borrowers' own statements over the weekend. Each gauge is one covenant — the needle is today's re-test, a dashed needle is last quarter, a blue diamond is what the certificate said. The 49 gauges that need Priya first are on top.
Over the weekend: “Covenant tester moved Calder Precision into the red · senior leverage 3.18x against 3.00x.”
Halvorsen certified fixed charge coverage of 1.31x against a 1.25x minimum — a pass, with 4.8% left. It is rated 5 and on the watch list, so its re-test waited for an analyst. Priya presses one button and the six agents run in the side rail, each step shown with what it found.
Recalculated from Halvorsen's statements — never from its certificate.
The coverage needle moves to 1.23x, past the 1.25x limit, and the gauge is stamped “Borrower-reported pass, recalculated breach”. The certificate's diamond stays at 1.31x, so the gap is on the dial itself. Line by line, the rail shows why: Consolidated EBITDA of $10,659,000 on the statements, not the $11,130,000 certified.
“The First Amendment caps the Springfield add-back at 10% of EBITDA before it — $949,000. The certificate adds back the full $1,420,000.”
The certificate collector logged the Q3 package, a day early. The agreement reader read the Credit Agreement and the First Amendment, 142 + 11 pages. The financial spreader built the trailing twelve months, tied to the statements to the dollar. The covenant tester found $471,000 of add-back above the cap, and the certificate's “in compliance · no Default” statement marked incorrect.
Every covenant with its section, limit and test frequency — total leverage ≤ 3.50x (§7.1), fixed charge coverage ≥ 1.25x (§7.2), liquidity ≥ $5.0M (§7.4), capex ≤ $6.0M (§7.5). The Consolidated EBITDA definition in §1.1 opens beside it, as amended 9 December 2025, with the 10% cap highlighted on page 14.
The latest amendment always wins, and is cited.
Bank-tested coverage went 1.52x, 1.44x, 1.36x, then 1.23x; leverage rose from 2.31x to 2.84x. Halvorsen moved to watch, rating 4 → 5, on 14 August, after coverage fell three quarters, with Walter Hsu's approval. The borrower page holds the agreement, the amendment, the certificate and the timeline.
Priya confirms that Halvorsen did not meet the fixed charge coverage covenant for the four quarters to 30 September 2026. Her signature records its meaning — “I re-checked the calculation” — and the time. The letter goes next to Tom Brannigan; a rating change from 5 to 6 is proposed to Walter Hsu, the Chief Credit Officer.
The covenant tester proposes a breach. Only the analyst declares one.
The letter drafter filled template RR-03, approved by legal, with the clause, the figures and the cure: a $108,500 cash equity contribution under §7.3, by 7 December 2026, with 0 of 2 cures used. Routing shows who has done what — the drafter, Priya's confirmation, Tom to sign and send, Walter Hsu to decide the rating.
“A confirmed breach always gets a reservation-of-rights letter — accepting late performance without one risks a waiver.”
Halvorsen joins Calder Precision and Ridgeway Cold Storage, whose waiver request is with Walter Hsu. Mill Race Brewing is late a second quarter running. Each exception carries its clause and its stage — Found, Confirmed, Notified, Waiver or cure, Closed — with an owner.
The covenant status report for the committee of 19 November is built from the monitor, every figure linked to its test: 3 open breaches, 9 borrowers under 10% headroom, 27 late certificates, and a median of 0.6 days from certificate to tested — against 19 days by hand a year earlier.
The same breach, seen by the four people who handle it — what their quarter looked like, and what it looks like now.
Six specialist agents collect, spread and re-test every covenant under the agreement's own definitions; the credit analyst confirms.
Reads each credit agreement and every amendment into a covenant register: definitions, thresholds, step-downs, test frequency, cure rights and reporting deadlines.
Keeps the reporting calendar, requests certificates and statements from each borrower, sends reminders and logs arrival and lateness.
Spreads the borrower's statements into the bank's template and builds trailing twelve months from the last audited year and the year to date.
Recalculates each covenant under the agreement's own definitions, including caps and exclusions on add-backs, compares it with the certificate and computes headroom.
Trends headroom across quarters and flags borrowers under 10% or falling three quarters running.
Drafts reminders, reservation-of-rights and waiver letters from the bank's approved templates, citing the clause, the figure and any cure.
Confirms; the RM sends, the CCO decides waivers. The agents propose; a named person decides.
Ask about any borrower, covenant, certificate or deadline — or say what to send. Every answer cites the clause or the statement behind it.
Why is Halvorsen 1.23x when it certified 1.31x?
Because of one add-back. The First Amendment lets Halvorsen add back the Springfield consolidation costs, but only up to 10% of EBITDA before that add-back — 10% of $9,490,000 is $949,000. The certificate adds back the full $1,420,000. Without the excess $471,000, Consolidated EBITDA is $10,659,000 and coverage is 7,429,000 / 6,030,000 = 1.23x, below the 1.25x minimum.
Which borrowers are within 10% of a covenant limit?
Nine borrowers, 14 covenants. The closest are Fairmount Packaging (coverage 1.33x, minimum 1.25x, 6.4% left), Ostrander Plastics (leverage 3.71x, maximum 4.00x, 7.3%) and Bellweather Foods (coverage 1.29x, minimum 1.20x, 7.5%). Bellweather is the one falling three quarters running.
How much equity would cure Halvorsen's breach, and by when?
$108,500, by Monday 7 December 2026. Section 7.3 allows a cash equity cure within 15 business days of the 14 November due date — Thanksgiving excluded, that is 7 December. Coverage needs a numerator of $7,537,500 against $7,429,000 today. Halvorsen has used 0 of its 2 cures, and cannot cure two quarters running.
Send reminders to the 27 borrowers with late certificates
Sent — day-after reminders to each CFO, with the relationship manager copied. Kittredge has promised Wed 18 Nov and Juniper Hill Fri 20 Nov; Saltlick asked for two weeks, and an extension needs you or the RM. Mill Race Brewing is late a second quarter running, flagged for Dev Patel.
13 screens from the working solution, on its sample data. Pick one to see it large.
The rules every certificate is re-tested against are settings, versioned and on the audit trail.
| Setting | Default | Choose from |
|---|---|---|
| Tight headroom | 10% | 5% · 10% · 15% · 20% · 25% |
| Declining trend | 3 quarters | 2 · 3 · 4 quarters |
| Report a difference from the certificate | 0.01x or $10,000 | 0.01x or $10,000 · 0.05x or $50,000 · Any difference |
| Reminders to the borrower | T−10, T−3, T+1, T+5 | T−10, T−3, T+1, T+5 · T−5, T+1, T+3 · T−10, T+1 |
| Late is an exception after | 0 days | 0 days · 5 business days · 10 days |
| Confirms a test result | Credit administration analyst | Credit administration analyst · Portfolio manager |
| Waivers, amendments and ratings 6 or worse | Chief Credit Officer | Chief Credit Officer · Credit committee |
| Minimum waiver fee | $5,000 | $5,000 · $10,000 · 0.10% of commitment |
Every figure is labelled: a target the solution is built to, an estimate, a typical published result, or a proven one.
“demo” = seen in the working solution, on its sample loan book · “target” = the design goal, measured in the live solution · “estimated” = our estimate. The 45-day certificate deadline is typical of SEC-filed credit agreements. People, companies and the bank named on this page are fictional — characters and sample data in the working solution.
Software that tracks every covenant in a lender's loan book: it knows each borrower's reporting deadlines, collects the compliance certificates and financial statements, tests the financial covenants and raises breaches and late certificates. Covenant Monitoring adds agents that read the agreements, spread the statements and re-test every covenant from the borrower's own numbers.
No. It recalculates each covenant from the borrower's statements under the agreement's own definitions, including caps and exclusions on add-backs, then compares the result with the certificate line by line. Any difference above 0.01x or $10,000 is reported, even when the covenant still passes.
The agreement reader reads the credit agreement and every amendment in date order into a covenant register. Where an amendment changes a definition, the amendment wins and both are cited — in the working solution, the First Amendment's 10% cap on the plant consolidation add-back.
No. The covenant tester proposes a result and the credit administration analyst confirms it. Letters are drafted from approved templates and go out only under the relationship manager's signature, and waivers and ratings 6 or worse are decided by the Chief Credit Officer.
The certificate collector keeps the reporting calendar and sends requests and reminders — by default at T−10, T−3, T+1 and T+5 — to the borrower's CFO with the relationship manager copied. A missing certificate becomes an exception the day after it is due, and only a person can grant an extension.
Yes. The early-warning watcher trends headroom across quarters and flags any covenant within 10% of its limit, or any borrower whose headroom has fallen three quarters running. Both thresholds are settings.
Yes. Tight headroom, the declining-trend rule, the variance to report, the reminder schedule, when a late certificate becomes an exception, who confirms, who sends letters, who decides waivers and the minimum waiver fee are all settings, versioned and on the audit trail.
The Agentic Solution Engine builds and deploys it from your requirements — your credit policy, spreading template, letter templates and a sample of agreements and certificates — and it goes live once every quality gate has passed. We will walk you through it on your own borrowers first.
Every related entity spread in hours, each number linked to its page.
1-min demoCredit Memo AutomationA cited first draft the same day, not after days of pasting.
1-min demoCommercial Loan OriginationFiles ready for underwriting in days, not weeks of chasing documents.
1-min demoWe'll run Covenant Monitoring on a sample of your own agreements and certificates.