What is a covenant breach?

A covenant breach occurs when your leverage ratio (Total Debt / Annual EBITDA) exceeds the threshold set in your loan agreement. This gives your lender significant control — including the right to charge penalties, accelerate repayment, or call in the loan entirely.

How is the covenant breach date calculated?

Covenant Horizon projects your trailing 12-month EBITDA forward using your monthly trend, then checks each month (or quarter) whether Total Debt / Projected Annual EBITDA exceeds your covenant threshold. The first date it crosses is your projected breach date.

What is the Cash Conversion Cycle and why does it matter for covenant compliance?

The Cash Conversion Cycle (CCC) measures how many days cash is tied up in operations — in inventory, receivables, and payables. Even if your income statement looks healthy, a long CCC means cash is trapped and unavailable, effectively reducing your headroom before a covenant breach.

Is my financial data safe in this calculator?

All calculations run entirely in your browser. No financial data is sent to any server. The only data transmitted is your email (if you opt in for a personalised analysis), which is processed by Netlify under GDPR-compliant terms.

What does the negotiation playbook do?

Based on your results, the tool generates context-specific recommendations — whether to request a waiver, accelerate funding, renegotiate terms, or address liquidity first. Each recommendation links to relevant Early Warning Index resources.

Can I use Danish number formatting?

Yes. Covenant Horizon automatically detects both English (1,200,000.50) and Danish (1.200.000,50) number formats. You can also switch the entire interface to Danish using the language toggle.

What is the What-If Simulator?

The What-If Simulator lets you adjust key variables — debt level, EBITDA trend, covenant threshold, and EBITDA add-backs — using live sliders. The breach date, headroom, leverage, and Early Warning Score update instantly so you can model scenarios without changing your original inputs.

What is the Bridge Round Checklist?

When a breach is detected, the Bridge Round Checklist scores your readiness for bridge financing across four survival metrics (cash runway, EBITDA trend, leverage vs. covenant, burn multiple) and six warning signals. It gives a clear proceed, high-risk, or do-not-bridge recommendation.

Can I upload my financial reports instead of entering data manually?

Yes. Upload a P&L or Balance Sheet in CSV or Excel format and the tool auto-detects revenue, EBITDA, debt, cash, receivables, inventory, and payables — pre-filling all fields in seconds. You can also download a template to format your data correctly.

What are the Lender Communication Templates?

The tool generates four pre-drafted communication templates personalised with your data: a covenant waiver request, a renegotiation letter, a proactive lender update, and a bridge financing request. Each can be copied or printed and used as a starting point for lender conversations.

How does the sensitivity analysis work?

The tool automatically calculates what happens if your EBITDA declines by 10% from your projected trend. It shows how many weeks earlier the breach date would move forward, helping you understand your margin of safety and plan for downside scenarios.

What is the Early Warning Score?

The Early Warning Score is a composite metric from 0 to 100 that combines three factors: covenant proximity (how close you are to breach), cash runway (how long your cash lasts), and operational efficiency (cash conversion cycle). A higher score indicates a stronger financial position.

Calculate when the bank takes control

Enter your numbers and see when a covenant breach could shift negotiating power to your lender. You'll get the date, the pressure points, and what can still change the outcome.

Enter your loan numbers and see your exposure.

Why this matters

Your loan agreement set limits when you took on the debt

When those limits are breached, the balance of power shifts

The critical question is not just when liquidity runs out. It is when the bank takes control before you are ready with your next move

Covenant Horizon shows you the date, the pressure points, and which actions can still change the outcome

For companies with covenant-bound debt.

Upload your P&L and/or Balance Sheet from your accounting software. Supports CSV and Excel (.xlsx).

📁

Drop file here or click to browse

.csv, .xlsx, .xls

Upload your loan agreement PDF and let AI extract the covenant threshold, debt amount, test frequency, and more. You review and edit everything before applying.

📄

Drop PDF here or click to browse

.pdf only

Your loan numbers

?Not sure which to pick? Monthly EBITDA is what your business earned in the most recent month. LTM EBITDA is the total for the last 12 months. If you have your annual P&L, choose LTM. If you only have recent monthly reports, choose Monthly. 📋 Where to find it: Your P&L statement from your accountant. Look for "EBITDA" or "operating profit."

Currency:

Number format: 1,000,000.00

Current Leverage Ratio?How many years of profit it would take to pay off all your debt. A ratio of 2.8 means you owe 2.8 times your annual earnings. We calculate this from your other inputs — enter it here so we can check they match. 📋 Where to find it: Your lender may quote this in review meetings or quarterly reports.

Debt / EBITDA (e.g. 2.8)

Covenant Threshold?The limit your bank sets on how much debt you can have compared to your earnings, typically called a ratio in contracts. If you go over this number, you've broken a rule in your loan — and the lender gets extra power. 📋 Where to find it: Your loan agreement, in a section usually called "Financial Covenants."

Max ratio before breach (e.g. 3.0)

Monthly EBITDA?Your company's monthly operating profit before accounting adjustments. Think of it as: revenue minus the costs of running the business, but before interest, tax, and depreciation are subtracted. 📋 Where to find it: Your P&L statement from your accountant. Look for "EBITDA" or "operating profit."

Current monthly figure

LTM EBITDA (Annual)?Your total operating profit for the last 12 months. The historical actual numbers are more accurate than taking one month and multiplying by 12. 📋 Where to find it: Ask your accountant for "trailing twelve months EBITDA" or if that is not available, add up the last 12 monthly figures from your P&L statement.

Trailing 12-month EBITDA

Monthly EBITDA Trend?Is your monthly profit going up, down, or staying flat? Enter the amount that changes each month. A negative value means it's shrinking (e.g., -25,000). Positive means growing. Enter 0 if it's roughly stable. 📋 Where to find it: Compare your last 3–6 months of EBITDA and estimate the monthly pattern. You find the EBITDA in your P&L statement from your accountant or bookkeeper. Look for "EBITDA" or "operating profit."

Change per month (negative = decline)

Total Debt?The total amount you owe to your lender — loans, credit lines, and any borrowed capital. Do not include what you owe suppliers (trade payables) or money from investors (equity). 📋 Where to find it: Your balance sheet under "Interest-bearing debt" or "Long-term liabilities." Your lender can confirm.

Outstanding debt balance

Cash Zero Date?The date when your cash runs out if nothing changes. If this comes before a loan breach, running out of cash is your more urgent problem. 📋 Where to find it: Your accountant or CFO can estimate this from your current cash balance and monthly burn rate.

When cash runs out

Expected Funding Close?When you expect new money to arrive — from investors, a new loan, or refinancing. If you break your loan terms before this date, the lender has leverage over you before your lifeline lands. 📋 Where to find it: Your own funding timeline. When is the next capital expected to close?

When new funding lands

Fine-tune the model to match your actual covenant agreement: testing frequency, net debt definitions, and EBITDA adjustments.

Test Frequency?How often your lender checks whether you're within your loan limits. Most lenders check quarterly (every 3 months). You can only break the rules on a test date — not between them. 📋 Where to find it: Your loan agreement, in the covenant testing section. Or ask your lender contact.

Monthly or Quarterly

Next Test Date?The date of your next scheduled covenant test. Future test dates are calculated forward from this date. If left empty, the model tests every month from today. 📋 Where to find it: Your lender's reporting schedule or your last compliance report.

Anchor for test schedule

Use Net Debt (Debt minus Cash)

Many covenants use net debt instead of gross debt

?Some loans measure debt after subtracting your cash in the bank. If your loan uses "net debt," enable this and enter your cash balance — it makes your ratio look better. 📋 Where to find it: Check if your loan agreement says "net debt" or "gross debt" in the covenant definition.

Cash on Hand?Your current unrestricted cash balance. This is subtracted from your total debt to calculate net debt. 📋 Where to find it: Your latest bank statement or accounting system.

Current cash balance

EBITDA Add-backs %?Some loan agreements let you adjust your profit number upwards for unusual costs (like a one-time restructuring). This makes your financial position look better for the covenant test. 📋 Where to find it: Your loan agreement may list "Permitted Adjustments" or "EBITDA Add-backs." Ask your lawyer or lender.

e.g. 10 for 10% add-back

The Cash Conversion Cycle measures how long cash is tied up in operations. Adding these figures shows the hidden drag on your effective headroom.

Days Inventory Outstanding?Average days to sell inventory. Calculated as (Avg Inventory / COGS) x 365. Uses COGS, not revenue.

Days to sell inventory (e.g. 45)

Days Sales Outstanding?Average days for customers to pay you. Calculated as (Avg AR / Revenue) x 365. Based on revenue.

Days to collect payment (e.g. 38)

Days Payable Outstanding?Average days you take to pay suppliers. Calculated as (Avg AP / COGS) x 365. Uses COGS. Higher works in your favor.

Days to pay suppliers (e.g. 30)

Annual Revenue?Annual revenue or run-rate. Used with gross margin to calculate the cash trapped in your operating cycle.

For working capital estimation

Gross Margin %?Your gross margin as a percentage. Used to derive COGS from revenue for accurate DIO and DPO calculations. COGS = Revenue x (1 - Gross Margin). E.g. 65% margin means 35% of revenue is COGS.

e.g. 65 for 65% margin

Revenue Concentration?Percentage of total revenue from your single largest client. If above 20%, losing that client could dramatically accelerate a covenant breach.

% from largest client (e.g. 35)

Monthly Revenue Growth Rate %?Your expected monthly revenue growth rate as a percentage. Used to project how working capital demand scales with growth. Even modest growth rates can create significant cash demand if your cash conversion cycle is long.

Expected monthly revenue growth (e.g. 10)

Fixed Monthly Costs?Total fixed monthly operating costs including payroll, rent, insurance, and other overhead that does not vary with revenue. Used to calculate operating cash flow after working capital absorption.

Payroll + rent + other fixed opex

Current Cash Buffer?Your current available cash balance for operations. This is the starting point for the stress test projection. May differ from Cash on Hand used in the net debt calculation if some cash is restricted.

Available cash for operations

Basis of calculation & projection

PRO

💡 To compare scenarios: save this result, change your inputs above, calculate again, and save the new result. Up to 3 scenarios are shown side by side.

Next Test Date at Breach—

Cash Zero Date—

Burn Multiple—

Bridge Round Checklist PRO

Survival Metrics

Warning Signals

Before You Bridge

What-If Simulator PRO

Drag the sliders to see how changes affect your covenant position in real time.

EBITDA Trend

Total Debt

Covenant Threshold

EBITDA Add-backs %

0%25%

Revenue Growth Rate ?Drag to see how different growth rates affect your cash crisis timing. The Cash Crisis row below updates in real time. Lower growth reduces cash demand; higher growth accelerates it. The full stress test card below shows your baseline analysis — to update it with new numbers, change the inputs above and click Calculate again.

0%50%

Breach Date —

Headroom —

Current Leverage —

EWI Score —

Cash Crisis —

Cash Conversion Cycle Impact

Cash Conversion Cycle—

Receivables (AR) Tied Up—

Inventory Tied Up—

Payables (AP) Funding—

Net Working Capital Trapped—

Working Capital Drag on Headroom—

Cash Conversion Stress Test PRO ?This test answers one question: how much growth can this business sustain before cash becomes the constraint? The breakpoint growth rate is the maximum monthly revenue growth rate your business can sustain without running out of cash — given your current margins, payment terms, cost base, and cash reserves. Above this rate, growth consumes cash faster than operations generate it. The business will need external capital (credit line, equity, or invoice financing) even if it is profitable. Color coding: Green (above 30%) = comfortable room to grow. Amber (15–30%) = growth is nearing your cash capacity. Red (below 15%) = very little room — small changes could trigger a crisis.

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Time to Structural Cash Crisis ?This is not runway. Runway measures when cash runs out from losses. Structural cash crisis measures when cash runs out from growth. When revenue grows, your business needs more working capital — more cash tied up in receivables, inventory, and operations. If that demand exceeds the cash your margins generate, you run out of cash while still being profitable. This metric shows when that happens at your current growth rate.—

Growth-Induced Cash Demand

This table projects your monthly revenue, the additional working capital each month demands, and your resulting cash position — assuming your current growth rate, margins, and payment terms continue. Red values indicate months where cash is negative.

Month	Revenue	WC Demand	Cash Position

Cash Fragility Analysis ?These three scenarios show how sensitive your breakpoint is to small changes in your operating terms. Each line answers: if one thing gets slightly worse, how much does your sustainable growth rate drop? A small change that dramatically lowers the breakpoint signals structural fragility — your growth model depends on terms staying exactly as they are. Red text means that scenario pushes the breakpoint below your current growth rate.

Board Summary

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Method & Real Example

Covenant Horizon estimates covenant headroom as time-to-breach on the next covenant test dates, using net debt to EBITDA and an explicit EBITDA trend assumption. Results are directional. Your loan agreement definitions always govern.

Example Inputs

Net debt	4.35m
LTM EBITDA	1.80m
Current net leverage	2.4×
Covenant threshold	3.0×
EBITDA trend	−10k / month
Test frequency	Quarterly
Next test date	31 Mar 2026
Cash-zero date	31 Jul 2026
Funding close	30 Sep 2026
Cash conversion cycle	87 days

Example Output

Projected breach test date	30 Jun 2026
Headroom	13 weeks
Negotiation risk	Breach before funding close

That single output drives the board conversation: request a waiver now, accelerate the funding timeline, or renegotiate the covenant — while you still have leverage.

Calculate when the bank takes control

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Example Output

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