Test your debt covenants every period
Covenant testing often happens in a separate spreadsheet at quarter end, with EBITDA adjustments and ratios rebuilt from a fresh export each time. Using the definitions in your credit agreement, the Accounting Agent can calculate each covenant metric from your closed numbers and test it against the required threshold every period.
What the Accounting Agent prepares
- Covenant metrics such as leverage, interest coverage, fixed charge coverage, and minimum liquidity, calculated to your agreement's definitions
- Adjusted EBITDA built from the GL, with each add-back listed and traced to source
- A test of each metric against its threshold, showing headroom in amount and percent
- A flag when a metric moves close to its threshold, at the level your team sets
- A covenant working paper your team can use to support a compliance certificate
How it works
- Pull the data. The Accounting Agent pulls the closed trial balance, debt balances, and interest from your ERP and debt schedule.
- Prepare the work in your logic and format. Your team describes each covenant definition and threshold once, and the Accounting Agent builds the calculation in Excel with formulas you can inspect.
- Review and approve. You review each period's test and sign off, with the working paper attached to the task.
What stays in your control
- Covenant definitions and thresholds set and changed only by your team
- Sign-off on each period's test recorded with the reviewer and date
- Every figure traceable to the trial balance it came from
Standard note
FAQ
What is debt covenant compliance monitoring?
It is the regular check that a borrower's financial results meet the ratios and limits in its credit agreement, such as maximum leverage or minimum interest coverage. Teams usually test at each date their lender requires.
Can Ledge use our agreement's specific covenant definitions?
Yes. Your team describes each definition, including adjustments and add-backs, and the Accounting Agent applies the same logic every period.
Does Ledge send compliance certificates to our lender?
No. Ledge prepares the calculation and the supporting working paper. Your team reviews it, and what goes to the lender stays your decision.
