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debt-service-and-covenant-analysis

Computes debt coverage ratios and tests loan covenant headroom against financial statements.

Updated Aug 22, 2026
Search Tags:#financial ratios#leverage#DSCR#covenant analysis#debt service#times interest earned#loan assessment
One-click install
npx skills add https://github.com/fritzgeraldz/Vibe-Managing --skill debt-service-and-covenant-analysis-fritzgeraldz
Or copy as Structured Prompt for Agent▼
Please help me install this Agent Skill.
Skill: debt-service-and-covenant-analysis
Source: https://github.com/fritzgeraldz/Vibe-Managing/tree/main/skills/finance/debt-service-and-covenant-analysis
Command: npx skills add https://github.com/fritzgeraldz/Vibe-Managing --skill debt-service-and-covenant-analysis-fritzgeraldz

SYSTEM DOCUMENTATION & REQUIREMENTS

What problem does it solve? Business owners carrying loans often cannot tell whether their earnings safely cover interest and principal payments, how much additional debt they could support, or whether they are close to breaching a lender covenant that could trigger technical default. ## Core Features & Use Cases - Coverage Analysis: Computes Times Interest Earned (TIE) and DSCR / Times Burden Covered from EBIT, EBITDA, interest, and tax-adjusted principal schedules. - Covenant Testing: Evaluates every covenant metric (current ratio, DSCR, debt-to-equity, and more) against its threshold, computes headroom, and forward-tests against forecasts to catch projected breaches early. - New-Debt Assessment: Recomputes combined coverage and covenant impact for a proposed loan, runs a return-vs-rate value test, and returns a fit, resize, or do-not-take verdict with a safe size. - Use Case: A founder with a bank covenant requiring DSCR >= 1.25 asks whether a new $150k equipment loan is affordable; the analysis shows combined DSCR would drop to 0.82 and recommends resizing to roughly $65k while flagging an existing current-ratio breach. ## Quick Start Ask the assistant to check whether the business can afford a new loan and whether any debt covenants are close to being breached.

Frequently Asked Questions about debt-service-and-covenant-analysis

High-intent search queries and answers about installing and using this skill.

FAQPage Schema
How do I calculate DSCR and Times Interest Earned for my business?▼

TIE equals EBIT divided by interest expense, while DSCR divides EBIT by interest plus principal grossed up by one minus the tax rate, since principal is not tax-deductible. A DSCR below 1.0 means operating earnings cannot cover mandatory debt payments.

How can I check if I am close to breaching a loan covenant?▼

Evaluate each covenant metric, such as current ratio, DSCR, or debt-to-equity, against its exact lender-defined threshold and compute headroom as the distance to breach. Forward-testing against financial forecasts catches projected breaches before the reporting date.

How much additional debt can my business safely support?▼

Maximum supportable debt is solved by finding the debt balance whose total debt service keeps DSCR at the target minimum given current EBIT or EBITDA and the interest rate. Existing grossed-up debt service is subtracted from total coverage capacity to find remaining room.

Should I use EBIT or EBITDA for debt coverage ratios?▼

It depends on the lender's covenant definition, since some agreements specify EBITDA as a cash-flow proxy while others use EBIT. When the definition is unspecified, report both versions and flag the assumption rather than guessing.

When should I not take on new business debt?▼

Avoid new debt when combined TIE falls below roughly 1.5 or DSCR below about 1.2, when it would breach any covenant now or in the forecast, or when the funded project's expected return is below the debt's interest rate, which destroys owner value.

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