The covenant you cannot see: revenue triggers in growth facilities
Most growth-stage facilities are now tested on revenue rather than EBITDA. That is progress, but only if both sides agree what revenue means.
Henrik Sørensen
Chief Credit Officer
Underwriting in brief
Part of our Underwriting series, this 5 min note is written by Henrik Sørensen, Chief Credit Officer, and sets out what the desk is seeing, followed by the three points we would watch before signing.
- Series
- Underwriting
- Published
- 11 August 2026
- Author
- Henrik Sørensen · Chief Credit Officer
- Reading time
- 5 min
A covenant is only useful if it is measurable from the management accounts the company already produces. Testing a pre-profit software company on EBITDA tells you almost nothing except that the company is pre-profit. Testing it on contracted recurring revenue tells you whether the business is behaving as underwritten.
The difficulty is definition. Gross versus net revenue, annualised versus trailing, the treatment of pilot agreements and one-off implementation fees — each choice moves the trigger by five or ten per cent, which is often the entire headroom in the facility.
We write the definition into the term sheet, before diligence, and test it on the last four quarters of actuals. If the definition would have breached in a quarter the company considers successful, the facility is mispriced and we say so rather than tightening it later.
The result is a covenant set that a finance team can report against in a morning and a lender can rely on in a downturn. That is the whole point: a covenant nobody understands is not protection, it is a future dispute.