Debt Covenant Compliance Tracker: Know Your Headroom Before the Lender Does

The problem this kills

Every quarter, the controller opens the loan agreement, finds the covenant definitions buried in a schedule, re-keys the right balances and trailing-twelve-month figures into a spreadsheet, computes leverage and DSCR and the current ratio, eyeballs whether each one clears its threshold, and then types the numbers into a compliance certificate the bank requires within a fixed number of days. One transposed number, one ratio computed against the wrong definition, one trailing period off by a month — and you've either certified compliance you didn't have, or set off a covenant-breach fire drill that wasn't real.

The deeper problem is that the spreadsheet only tells you about this period. It doesn't show how much headroom you have, and it doesn't show the trend. So the quarter you actually trip a covenant arrives as a surprise — when the smart version of this job is seeing the breach coming three periods out, while there's still time to do something about it: pull a draw forward, defer capex, talk to the lender before you're in default.

A covenant compliance pack is one of the highest-stakes documents finance produces — a breach can accelerate the whole loan. It deserves to be a real, governed application that uses the lender's exact definitions, shows headroom and trend, flags what's nearing the line, and never goes out the door without a human signing off.

What you'll build

A simple internal web app for your finance team. You enter the lender's covenant definitions exactly as written in the loan agreement — each ratio's name, its formula (which accounts and which trailing period), the comparison (must be ≤ or ≥), and the threshold for each test date. You import each period's financials or trial balance, and your debt / amortization schedule. You enter the period's starting figures once.

The tool computes every covenant for the period — leverage (debt / EBITDA), debt service coverage (DSCR), current ratio, fixed-charge coverage, minimum EBITDA, maximum capex, whatever your agreement actually requires — and for each one shows the computed value, the threshold, pass/fail, and the headroom (how far you are from tripping). It flags covenants nearing their limit before they breach, and charts each ratio's trend across periods so a future breach is foreseeable. The controller reviews the computed ratios and the headroom, adjusts any input that looks wrong, and approves the compliance certificate before it's exported and sent to the lender. Nothing reaches the bank until a person signs off.

What's inside the Implementation Plan

The downloadable plan is a step-by-step file you paste into an AI coding agent. It opens by interviewing you about your business — your specific lenders and facilities, the exact wording and trailing periods of each covenant, how your trial balance is shaped and which accounts roll into EBITDA and debt service, your test dates and reporting deadlines, your definition of "near the limit," and the messy exceptions (add-backs, pro-forma adjustments, equity cures, multiple facilities with different definitions of the same ratio). It reflects a short tailored spec back to you and gets your thumbs-up before it builds anything, so the tool uses your lender's definitions — not a generic textbook formula that the bank will reject.

From there it walks the agent through the data model, the financials and debt-schedule import, the covenant calculation engine, the headroom and at-risk flagging, the ratio-trend report, the controller approval gate, and the compliance-certificate export. Every step ends with a ready-to-copy prompt. There's a full "No API yet?" path that uses a Google Sheet / CSV trial balance as the data source and produces a clean CSV and a print-ready PDF certificate — so you can build and run the whole thing this weekend regardless of what accounting system you're on.

The governance it includes (this is the point)

This is a document you certify to a lender, so the controls aren't optional. The plan builds in login so only your finance team can use it, row-level security so you only ever see your own organization's covenants and financials, a complete audit trail of who changed which input and who approved which certificate, a hard human-approval gate so no certificate is exported or emailed until the controller reviews the ratios and headroom and signs off, and duplicate guards so the same covenant can't be certified twice for the same period.

Who it's for

Controllers, treasury, and CFOs at any company carrying a term loan, revolver, or other debt with financial covenants — and the finance-owning founder who reports compliance to a bank or private-credit lender. If you can find the covenant section in your loan agreement and export a trial balance, you can build this.

You've got this — start with the plan, paste the first prompt, and answer the interview. You'll have your first covenant pack — ratios, headroom, trend, and a draft certificate — on screen before the weekend's out.