Loan Covenant Compliance Checklist

The controller pulls the executed credit agreement plus every amendment and waiver letter. Covenant definitions get redefined in amendments more often than people remember — pro-forma EBITDA addbacks, springing covenants, and equity-cure language are common rewrites.

Compliance must run off the closed trial balance, not a soft close. Confirm the period is locked in NetSuite / Sage Intacct / QBO and that all AJEs through close are posted. Reopening for a covenant recalc post-submission is the worst version of this.

Build the FCCR workpaper using the credit-agreement formula, not a generic version. Most agreements define the numerator as TTM EBITDA less unfinanced capex less cash taxes less distributions, and the denominator as scheduled principal plus cash interest. Tie every input back to the GL and prior-period workpapers.

Funded debt divided by TTM EBITDA, per the agreement's defined terms. Watch for capital-lease / operating-lease treatment under ASC 842 — many older agreements predate the standard and exclude operating-lease liabilities from funded debt; newer agreements include them. Use the definition in the document.

Schedule every permitted addback: stock comp, transaction expenses, restructuring, non-cash impairments, and any negotiated pro-forma synergies. Most agreements cap addbacks at 15-25% of unadjusted EBITDA. Document the cap test on the workpaper.

Add unrestricted cash plus revolver availability (commitment less drawn less letters of credit). Springing covenants commonly trigger when liquidity falls below a stated dollar amount or the revolver utilization crosses a percentage — flag the trigger now, not after the lender asks.

Pull YTD capex from the fixed-asset roll-forward and compare to the permitted-capex basket. Most agreements allow a one-year carryforward of unused basket; track it explicitly in the workpaper so future periods inherit the right starting balance.

Capture every new note, equipment lease over the de minimis threshold, intercompany loan, and earnout liability booked during the period. Map each item to a permitted-debt basket in the credit agreement; anything that doesn't fit needs a consent letter from the agent.

Pull every disposal from the fixed-asset sub-ledger and any divestiture from legal. Test against the permitted-disposition basket and confirm whether net proceeds trigger a mandatory prepayment under the excess-proceeds clause (commonly 100% above a $1M-$5M threshold unless reinvested within 12 months).

Restricted payments include dividends, share repurchases, and subordinated-debt prepayments. Most agreements gate these on a leverage-ratio condition plus an available-amount basket. Pull distributions from the equity roll-forward and confirm each one passed the gate at the time it was made.

Check the treasury inbox and the agent's portal for any default notices, reservation-of-rights letters, or pending amendment requests. A reservation-of-rights letter is not yet a default but signals the lender has identified an issue — the CFO should be in the loop before certificate sign-off.

Cross-default and cross-acceleration clauses pick up defaults under other material indebtedness — equipment finance, real-estate mortgages, hedge contracts. Review the schedule of other debt; a missed equipment-loan payment can trip the credit facility even if the bank covenants are clean.

Walk through the issue, the cure path (equity cure, addback negotiation, waiver request, amendment), and the timing. The CFO decides whether to self-report ahead of the certificate or pursue a private waiver before the deadline.

Draft the request to the agent: covenant tested, level reached vs. required, root cause, projected trajectory, and the specific relief requested (one-time waiver, covenant reset, or amendment). Loop in outside counsel for amendment-level changes.

Syndicated facilities need majority-lender or required-lender consent depending on what's being amended. Required-lender thresholds (commonly 50.1%) cover financial covenants; sacred-rights items (rate, maturity, principal) need 100%. Track signatures on the consent grid.

Use the exact exhibit form from the credit agreement — usually Exhibit C or D. Populate every covenant calculation, the no-default representation, and the officer signature block. Tie every number on the certificate to the workpaper attached.

The certificate is signed by an authorized officer (typically CFO or treasurer). Route via DocuSign with the workpaper bundle attached for the officer's review file. The signed PDF is the audit-trail artifact regulators and future diligence will request.

Upload to the agent's portal (Intralinks, Debtdomain, SyndTrak) or send via the notice address in the agreement. Late delivery is itself a reporting covenant breach — get this in a day early, not a day late.

Save the signed certificate, workpaper, calculation backup, and submission confirmation in the loan binder (SmartVault, ShareFile, or document repository). Auditors will pull this for the year-end debt confirmation; future refinance diligence will pull every quarter back four years.