Covenants rarely break on the ratio; they break on its definition and on information that comes too late. We provide the financial leadership that calculates monthly, projects forward and speaks up in time.
A loan agreement requires ratios by fixed deadlines – leverage, interest cover, sometimes an equity ratio – and nobody in the company knows exactly how the agreement defines them. Or the numbers are only calculated at the test date, when there is no time left to act.
Common triggers are an upcoming refinancing, a newly added lender, a threshold that is visibly getting tight, or a standstill agreement with increased reporting obligations.
The interim CFO takes on three things. First, the definition work: which EBITDA does the agreement mean – reported, adjusted or by its own definition? Which adjustments are permitted, with what cap? Do shareholder loans count as financial debt? These questions decide between compliance and breach and are often only asked when things get tight.
Second, the monthly calculation and the forward projection in the integrated plan, so that a looming breach becomes visible months ahead rather than at the test date.
Third, the dialogue with banks and debt funds. An announced breach with an action plan is a conversation; the same breach, discovered by the lender in the report, is a loss of trust.
Go through all loan agreements: which ratios, which definitions, which deadlines, which restrictions and obligations. The calculation logic is fixed in writing.
Monthly determination instead of a test-date calculation, ideally agreed with the lender.
The ratios move into the integrated plan, so that a looming breach becomes visible months in advance.
Submission on time, and where problems are foreseeable, the timely approach to the lender with an action plan.
The missed reporting deadline – and at the same time the only one that is completely avoidable.
Usually not immediate termination but negotiations: temporary waiver, adjusted thresholds, additional collateral, higher margin or an equity injection. What matters is the timing of the information.
Because it comes too late. Whoever calculates monthly and projects forward in the plan sees the problem with months of lead time – and precisely that lead time is the room for negotiation.
The interim CFO, before the first report. A logic agreed once and fixed in writing prevents the discussion at the worst possible moment.
Yes – as ongoing external financial leadership. The fixed-term appointment fits the acute phase: refinancing, looming breach, turnaround.
The service: CFO as a Service and Finance as a Service. For the fixed-term acute phase see Interim CFO, day rates by role on the pricing page.
Term in the glossary: Covenant.
In depth in the article Covenant reporting to banks and debt funds.