Check loan covenant compliance and draft the lender certificate
Calculates each financial covenant from the loan agreement's definitions, shows headroom, and drafts the compliance certificate.
The prompt
Help me test our loan covenants and prepare the compliance certificate.
Covenant definitions from the loan agreement: [PASTE exactly - e.g. "Fixed Charge Coverage Ratio", "Senior Leverage", "Minimum Liquidity", and the definitions of EBITDA, Funded Debt, Fixed Charges]
Test period and frequency: [e.g. "trailing 12 months, tested quarterly"]
Financials for the test period: [PASTE P&L, balance sheet, cash flow items needed]
Adjustments allowed by the agreement: [e.g. one-time costs, non-cash compensation, caps on add-backs]
Lender reporting deadline: [DATE]
Steps:
1. Calculate each covenant strictly using the agreement's definitions, not standard accounting definitions - show every component.
2. Show the add-backs used and confirm each is allowed and within any cap.
3. Compare to the required level and calculate headroom (in ratio and in dollars of EBITDA or cash).
4. Project next quarter's result if I give you a forecast, and flag a likely breach early.
Return:
1. A calculation table per covenant: Component | Source | Amount | Notes.
2. Summary: Covenant | Required | Actual | Pass/Fail | Headroom.
3. A draft compliance certificate in neutral language, with [OFFICER SIGNATURE] and [CONFIRM AGREEMENT TERMS] markers.
4. If any covenant is tight or failed, talking points for a proactive conversation with the lender.
Definitions in the agreement control. Have the calculation reviewed by our CFO or counsel before submitting.
Highlighted [brackets] are blanks to replace with your own details.
Fill in the blanks and use this promptMore Finance & Accounting prompts
What to fill in
- e.g. "trailing 12 months, tested quarterly"
- PASTE P&L, balance sheet, cash flow items needed
- e.g. one-time costs, non-cash compensation, caps on add-backs
- DATE
- OFFICER SIGNATURE
- CONFIRM AGREEMENT TERMS
How this prompt is built
This prompt follows the Few-Shot structure (Few-shot prompting). A few-shot prompt includes one or more worked examples of the input and the output you want, so the model can copy the pattern instead of guessing it.
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