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Understanding Key Financial Ratios for Covenant Monitoring

Monitoring financial covenants is crucial for companies to maintain compliance with loan agreements, bonds, or other financial contracts. These agreements often include specific ratios that companies must adhere to, such as debt-to-equity, current ratio, and interest coverage ratio. Ensuring compliance with these ratios not only mitigates financial risk but also fosters trust with creditors and investors.

Understanding Key Financial Ratios for Covenant Monitoring

Financial ratios play a pivotal role in covenant monitoring, providing insights into a company's financial health and performance. Here are some essential ratios commonly monitored:

  1. Debt-to-Equity Ratio: This ratio assesses the proportion of debt financing relative to shareholders' equity. A high ratio indicates higher financial leverage.

  2. Current Ratio: It measures the company's ability to cover short-term liabilities with short-term assets. A ratio of 1 or higher is generally considered healthy.

  3. Interest Coverage Ratio: Indicates how easily a company can pay interest expenses on its outstanding debt. A higher ratio suggests better financial health and lower risk of default.

  4. Leverage Ratio: Compares a company's total debt to its total assets, providing insights into its debt burden and financial leverage.

  5. Quick Ratio (Acid-Test Ratio): Measures the company's ability to cover immediate liabilities with its most liquid assets, excluding inventory.

  6. Fixed Charge Coverage Ratio: Assesses the company's ability to cover fixed charges, such as interest expenses and lease payments, with its earnings before interest, taxes, depreciation, and amortization (EBITDA).

  7. Cash Flow Coverage Ratio: Evaluates the company's ability to cover its debt obligations with its cash flow from operations.

The Role of Covenant Monitoring Software

Covenant monitoring software plays a vital role in automating and streamlining the process of monitoring these ratios. Here’s how:

  • Automated Data Extraction: Software can extract financial data from documents or integrate directly with financial systems, ensuring accurate and up-to-date information.

  • Real-Time Monitoring: Provides real-time monitoring of financial ratios against covenant thresholds set in loan agreements or bond indentures. This allows companies to promptly identify potential breaches and take corrective actions.

  • Alerts and Notifications: Generates alerts and notifications when ratios approach or breach covenant limits, enabling proactive management of financial obligations.

  • Customizable Reporting: Generates customizable reports that summarize covenant compliance status, trends over time, and potential risks. These reports are essential for internal stakeholders, auditors, and lenders.

  • Integration Capabilities: Integrates seamlessly with existing financial systems and ERP (Enterprise Resource Planning) platforms, ensuring data integrity and operational efficiency.

Benefits of Covenant Monitoring Software

Implementing covenant monitoring software offers several benefits:

  • Risk Mitigation: Reduces the risk of covenant breaches by providing timely alerts and insights into financial performance.

  • Efficiency: Streamlines the covenant monitoring process, saving time and resources compared to manual tracking and reporting.

  • Compliance Assurance: Ensures compliance with loan agreements and bond covenants, maintaining trust and credibility with creditors and investors.

  • Strategic Decision-Making: Provides valuable financial insights that support strategic decision-making and long-term financial planning.

BankStride covenant monitoring software is instrumental in helping companies navigate complex financial agreements and ensure compliance with critical ratios. By leveraging automation and real-time monitoring capabilities, companies can effectively manage their financial obligations, mitigate risks, and foster sustainable growth.

Covenant Tracking & Monitoring are important part of managing borrowers financial and reporting documents for loan monitoring. Almost 70% of banks still rely on some combination of spreadsheets, core ticklers, or other manual processes.

BankStride is a digital banking platform you've been waiting for. BankStride makes it easy for banks to automate loan documents, exceptions tracking, loan reporting and covenant monitoring. No more managing checklists, searching for files in emails, or waiting on updates from other parties. Just create your requests and let BankStride do the work for you. 

Many Banks and lending companies depend on non-public client information to provide their
services. Examples include:

  • Automate Document Gathering

  • Checklist For Loan Reporting Requirements

  • Frictionless Customer Experience To Send Documents

  • Create Credit Exceptions & Tickler Tracking

  • Automated Loan Monitoring and Loan Compliance

  • Loan Reporting, Risk & Financial Reporting

Without a dedicated tool, professionals would have to manually manage checklists and calendar
events to keep track of all required information. BankStride automates this work while improving
security and reporting.

Why BankStride platform

  • BankStride is a web-based software solution for commercial banks and credit unions that works with customers to manage loan agreements and eliminate credit exceptions. FileStride improves credit exception management by reaching beyond the walls of the bank to work directly with customers.

  • BankStride is like autopay for customer information.

  • With BankStride, banking teams can schedule recurring requests for documents like financial statements and tax returns, compare actual and threshold covenant values (e.g. minimum DSCR), and send compliance certificates for signature via DocuSign.

  • Customers respond to information requests much like paying an online invoice – they clearly see what’s required of them and they act. Customers can respond using a login-less portal or by email – no account or password required.

How does this help banks

  • A borrower’s risk profile can change significantly over the years that follow a lending event. Managing loan agreement adherence through reporting and internal monitoring is an ongoing and tedious battle for banks. 

  • Banks that pursue superb loan agreement management are faced with handling complex recurring tasks using the basic tools of email, spreadsheets, and calendar ticklers. Banks that let this work fall behind risk delaying their awareness of problematic loans or operating practices, jeopardizing capital and reputation.

  • With BankStride, banks gain high-resolution loan agreement monitoring that saves time and delights customers.

How does our bank customer use BankStride

  • Our bank customer uses BankStride to schedule and automate the activities required to monitor loan agreements. 

  • For example, BankStride has proven effective in managing revolving lines of credit. BankStride  automatically requests and reminds customers to submit monthly AR and AP listings, inventory analyses, and borrowing base certificates each month. 

  • BankStride reminds the banking team to test various financial ratios. The results of the customer’s actions and the ratio testing all roll up to per-banker and per-office reports that can be run on-demand in seconds.

BankStride is powerful for bankers




  • Track financial reporting, covenants, and certificates.

  • Issue compliance certificates for signature via DocuSign.



  • Bank leadership can drill down to identify pockets of risk and underperformance.

  • Every member of the team knows where to focus.



  • BankStride supports one-off and recurring information requests.

  • Flexible storage layer configuration options available.


Easy for bank customers





  • Customers receive tokenized links that enable portal access.

  • Bankers can request information from anybody with an email address.



  • Easy to use customer portals show the customer exactly what is needed.

  • Email-based file ingestion enables customers to email files in response to requests.



  • Reminders and alerts are aggregated to prevent information overload.

  • Alerts can be toggled per-user.

  • Customizable reminder schedules.


Automate Bank customer information requests for covenant monitoring , loan reporting, financial reporting and exception handling.

FiStride allows you and your customers to exchange information with zero friction so that you can reduce credit exceptions and recover valuable time. 

Know what you have, know what you need.

Why BankStride?

We're the digital banking solution you've been waiting for.

We make it easy to automate your loan reporting and covenant monitoring. No more managing checklists, searching for files in emails, or waiting on updates from other parties. Just create your requests and let BankStride do the work for you. 

How it works

BankStride combines checklists with cloud storage to help you communicate and monitor your information requests and covenants.

All it takes to get started:

  1. ​Request items by creating projects for one-off items or templated lists.

  2. Review incoming files from your client and mark items as satisfied or complete.

  3. Repeat with automatically recurring requests and reminders.

Who it's for

BankStride is a solution for individuals, teams, and banks that need a better way to request information. We've facilitated thousands of customer relationships and transactions with teams in banking, accounting, consulting,  and advisory services, just to name a few. 


Bankers increase efficiency and improve loan risk and compliance with loan monitoring, reporting and exceptions.

Know what you have,
know what you need

Create recurring requests with status indicators, reports and automatic nudges that keep everybody in the know.

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Many ways in,
password optional

Customers have the option to send files through email or a login-less portal. Either way, we get the files where they need to go.

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Built to empower bankers

Track and monitor financial reporting, covenants, and certificates, and identify pockets of risk and non-compliance.

Structured for you and
your team

Add your colleagues with a single click, and manage access permissions so the whole team can get the job done. 

We've facilitated over 1,000,000 client interactions...and counting.

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"BankStride has saved us tremendous time and effort by getting exactly the information we need."

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