Calculator

Covenant Headroom Calculator

A 3.15× leverage ratio against a 3.50× limit sounds comfortable. In dollars it often isn't. This shows how far earnings can fall before you're in default.

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01 / Your Numbers

EBITDA (trailing twelve months)

As your credit agreement defines it, capped addbacks in, unsupportable ones out.

Total debt

Check whether your definition captures capital leases, seller notes, earnouts, and letters of credit.

Annual debt service (interest + principal)

Needed only if you have a coverage covenant.

02 / Your Covenants

Maximum leverage covenant (×)

Minimum coverage covenant (×)

Minimum EBITDA covenant (optional)

Calculated locally · Nothing transmitted

Earnings can fall by

Covenant by covenant

If you're getting close

Tell the lender before they find it. A borrower who calls ahead with a forecast and a plan is treated very differently from one whose breach surfaces in a compliance certificate. Most first breaches end in a waiver, usually for a fee, but the negotiating position shifts permanently.

Know the number before you sign

Aim for 15–25% headroom against a realistic case, and negotiate the definitions, not just the levels. Getting an addback recognised can be worth more than a quarter-turn of leverage.

Have Us Read Your Term Sheet Loan Covenants Explained DSCR & FCCR Calculator

Educational only. Covenant definitions vary materially between agreements, this uses common market conventions, not your specific contract. Not an offer of credit, a commitment to lend, or legal advice. Calculations run locally in your browser; no signup or account is required.