Covenant Headroom Calculator
Spot calculator for one covenant. Input the current value, threshold, comparison operator, and your headroom buffer percentage. Get back the actual headroom, breach risk, and the three-state status (Compliant / At Risk / Breached). Same logic CapitalBridge runs in production across 191+ counterparties, exposed here as a single-covenant version.
Inputs
Type to recalculateLatest covenant value
Agreement floor / ceiling
Threshold for At Risk vs Compliant
Result
DSCR ≥ 1.20xShow formula trace
Want this across 191 borrowers, automatically?
CapitalBridge runs this exact calculation on every borrower data submission, across every covenant, with configurable headroom buffers per facility. Status flips automatically. Alerts dispatch. SHA-256 chained audit trail records every change. Production-proven across 7 funds, 191+ counterparties, 23 countries.
The math behind the gauge
Covenant headroom is the gap between the current value and the threshold, expressed as a percentage of the threshold. The headroom buffer is a credit-policy parameter that flips status from Compliant (green) to At Risk (amber) before a breach happens.
- Min covenant (DSCR, ICR, Min Cash): headroom = (current - threshold) / threshold
- Max covenant (LTV, leverage): headroom = (threshold - current) / threshold
- Status: headroom < 0 = Breached. headroom < buffer = At Risk. else Compliant.
"Headroom is the difference between knowing about a breach before it happens and explaining one after the fact. The buffer is where credit policy meets math."
One covenant above. A whole book below.
The calculator runs the formula once, on demand. CapitalBridge runs it on every borrower, every period, and answers the same question when asked directly.
| Borrower | Covenant | Headroom | |
|---|---|---|---|
| Kanzu Finance | DSCR | 20.8% | Compliant |
| Sahel Agri-Co | Leverage | 6% | At-risk |
| Lakeview Microbank | DSRA | -2% | Breach |
The gauge above, running on every borrower
The three-state status and the headroom percentage come from the exact calculation this tool shows, applied automatically whenever new borrower data lands.
What's Lakeview Microbank's headroom on DSRA?
Below the floor:
Illustrative figures. Same headroom formula as the calculator above, asked directly instead of typed in.
Skip the inputs, ask the platform
Once the covenant book lives in CapitalBridge, nobody re-types the current value and threshold; the assistant reads them from the latest submission.
How is covenant headroom calculated?+
Headroom is the gap between a covenant's current value and its threshold, as a percentage. For a minimum covenant (DSCR ≥ 1.20x at 1.45x): headroom = (current − threshold) / threshold = 20.8%. For a maximum covenant (LTV ≤ 75% at 66%): headroom = (threshold − current) / threshold = 12.0%. If headroom falls below the configured buffer, the covenant flips from Compliant to At Risk.
What is a good headroom buffer for private credit covenants?+
Common practice is a 10-25% buffer on financial maintenance covenants for healthy borrowers, and a tighter 5-10% buffer for stressed borrowers under enhanced monitoring. The buffer is a credit-policy decision, not a software one: tighter triggers earlier amber warnings, looser reduces false positives.
Can I monitor headroom across many borrowers at once?+
This calculator handles one covenant at a time for a spot check. For automated monitoring across an entire portfolio, recalculated on every borrower submission with alerts and a full audit trail, that's the CapitalBridge platform itself, production-proven across 191+ counterparties in 23 countries.