Loan Covenant Monitoring: Ratios Recomputed Whenever a Borrower's Numbers Change

Covenant tests that hold only until a borrower restates

Each quarter, every loan in the book is tested against its covenants: debt service coverage, leverage, minimum liquidity, and timely delivery of a compliance certificate signed by the borrower's finance lead. The result is a disposition for the loan and an escalation tier that decides who watches it: the relationship manager, the credit officer or the special assets team.

Loan agreements and quarterly statements are in Box, certificates arrive in the covenant mailbox in Outlook, the loan records and tiers are in Salesforce, and the exception report is a Google Drive document. Borrowers restate, certificates arrive late, and relationship managers waive late fees. Each event means walking the full rule order again, and a quick edit to one field usually leaves the reason or the tier behind.

Who works in the room

The portfolio team works in one room each quarter. Fin is the default agent and runs the tests, and it is the only agent with a grant on the covenant mailbox, so anything that needs a certificate goes to it. A question about the exception report reaches Ada, which owns that audit, and anything going to a borrower goes to Myco. When Fin re-tests a loan, it mentions Ada with the old and new results, so the exception report is corrected in the same thread.

A covenant quarter, test to watchlist

The rule order is in the policy and in the room guidelines, so every re-test follows the same sequence. An automation flags a loan in the room when its certificate due date passes, and Fin checks the mailbox for it.

Restatements, waivers and certificates that arrive late

A borrower's finance team uploads restated second quarter statements to Box with a note that an inventory write-down was booked in the wrong period. Fin recomputes coverage and leverage from the restated figures, not from the old spread, and writes a new reason on the loan. If the result changes, Ada corrects the exception report line, and Myco drafts a reply on that borrower's own thread naming the corrected loan ID.

Some events look bigger than they are. A relationship manager waives the late fee on a certificate that arrived three days late. The waiver is recorded, but it does not make the loan compliant. Fin walks the loan through the full rule order with the certificate now on file, and the disposition follows from the tests. The portfolio manager approves each change before it is written to Salesforce.

What the checks catch

• A certification status taken from an old file in Box instead of the certificate in the Outlook mailbox
• Ratios recomputed from the restated statement while the old reason stays on the loan
• A reply posted on a similar thread for another borrower, or one that quotes the wrong loan ID
• A fee waiver treated as a cure, when the covenant result is what decides the disposition
• A watchlist that still shows a loan under a relationship manager who handed it over this quarter

What stays with people

• Approving every disposition and tier before Salesforce is updated
• Granting fee waivers and deciding what to do about a breach
• Sending every borrower email, which Myco drafts in Gmail for the relationship manager
• Signing the watchlist closeout

Integrations in this workflow

Kylon is not a loan servicing system and it does not replace one. It sits across Salesforce, Box and the mailboxes the portfolio team already uses, and keeps each quarter's tests and reasons together.

• Box
• Gmail
• Google Drive
• Outlook
• Salesforce
• Slack

• Salesforce holds the loan records, dispositions, escalation tiers and watchlists
• Box holds the loan agreements with covenant terms and each quarter's financial statements
• Outlook is the covenant mailbox where signed compliance certificates arrive
• Gmail carries threads with borrowers' finance teams, answered through drafts a relationship manager sends
• Google Drive keeps the covenant policy and the exception report
• Slack is where relationship managers post borrower news and waiver decisions

Where to start

A good first cycle is one quarter and one relationship manager's book. Connect Salesforce, point the room at the Box folders for statements, give Fin a lasting grant to read the covenant mailbox, and add one rule to the room guidelines: agents propose dispositions and tiers with the ratios behind them, and the portfolio manager approves before any loan record changes.

“A restatement now means new ratios and a new reason, every time, not an edited cell.”

Set it up with your agent

Open a new Room, add your agent and paste this prompt. It connects the tools, builds the App with you and asks for your rules one step at a time, and nothing goes out until a person approves it.