For banks

Covenant Monitoring

Covenant monitoring is the periodic testing of a borrower's financial covenants against the terms of the loan agreement. FMV tests each covenant from the borrower's connected accounting data, shows the calculation, flags exceptions early, and produces a quarterly compliance package.

Book a demo All capabilities

At a glance

Basis: Covenant definitions from the loan agreement, tested on figures from the borrower's accounting system
Prepared by: The FMV platform, from the company's connected books
Deliverable: Online report that updates with the books
Used by: Banks and lenders, accounting firms
Delivered to: The client's FMV account and the ordering bank or firm

When it is used

A portfolio manager needs debt service coverage and leverage tested every quarter without re-keying borrower spreadsheets.
Loan review wants the calculation behind each covenant result, not a pass or fail on a borrower certificate.
A borrower is trending toward a breach, and the relationship manager wants to know two quarters before it happens.

What it includes

Covenant tests as defined in the loan agreement: debt service coverage, leverage, current ratio, minimum net worth
The calculation behind each result, traced to the source accounts
Trend against the covenant threshold, with early-warning flags
Peer context from FMV benchmarking
A quarterly compliance package for the credit file

Last updated October 24, 2026

Who uses it

Banks and lendersBorrowers connect their accounting system once. Each period, covenants are tested on the same definitions the credit agreement uses, and exceptions reach the relationship manager first.Accounting firmsAccounting firms preparing quarterly bank packages for clients can produce the covenant schedules from the same connected books.

Standards and sources

The loan agreement: Covenant definitions and test periods
Borrower accounting system: Source figures, normalized to FMV's standard chart of accounts
FMV benchmarking: Peer context for each tested ratio

Documents we need

Loan agreement or covenant schedule
Borrower authorization to connect its accounting system
Test calendar and reporting contacts

How it works

Connect
The company connects QuickBooks Online or Xero, or enters financials by hand.
Standardize
Accounts map to a standard chart of accounts, with a source note on every line.
Compute
The platform runs the analysis against FMV's private-company data and current market inputs.
Refresh
Results update when the books change. Peer sets are rebuilt each quarter.

Covenant monitoring questions

What is covenant monitoring?

Covenant monitoring is the periodic testing of a borrower's financial covenants, such as debt service coverage or leverage, against the thresholds in the loan agreement. FairMarketValue (FMV) runs the tests from the borrower's connected accounting data and shows the calculation behind each result.

Which covenants can FMV test?

FMV tests the financial covenants defined in the loan agreement, including debt service coverage, senior and total leverage, current ratio, and minimum net worth. Each test uses the agreement's own definitions and test periods.

How does FMV flag a covenant problem before a breach?

FMV tracks each covenant's trend against its threshold every period and flags a borrower that is moving toward a breach, so the relationship manager sees the exception before the test date.

Which accounting systems can borrowers connect for covenant monitoring?

Borrowers can connect QuickBooks Online or Xero directly today. Figures are mapped to FMV's standard chart of accounts with source notes on every line.

Does covenant monitoring replace a bank's loan servicing system?

No. FMV covenant monitoring produces covenant results and a compliance package that sit alongside the bank's existing servicing and credit systems.

How is covenant monitoring priced?

Pricing for covenant monitoring depends on the number of companies covered and how often results are needed. FMV quotes it for each bank portfolio or firm client book.