Free tool
Loan Covenant Headroom Checker
Enter your operating income, debt service, and covenant floor to see exactly how far income can fall before you breach — your cushion, in dollars and percent.
Income cushion before breach
$75,000
Some cushion, worth watching the trend.
Current DSCR
1.43x
Covenant floor: 1.25x
Income could fall by
12.5%
Before you hit the covenant floor.
What is covenant headroom?
Headroom is the gap between your current ratio and the covenant floor your lender requires. For a DSCR covenant, it answers a concrete question: how much can operating income drop before you breach? The income at which you would exactly hit the floor is covenant minimum × debt service; anything above that is your cushion.
Why headroom beats a quarter-end number
A single DSCR figure tells you where you are today. Headroom tells you how much room you have — and a shrinking cushion is an early-warning signal you can act on. The most expensive covenant breaches are the ones discovered after the period closes; watching headroom continuously from your live ledger is how you see the slide coming.
Do this automatically
CovenantGuard
Loan covenant monitoring software that tracks every ratio continuously and produces lender-ready compliance reports, straight from the ledger.