What it is
Covenant monitoring closes the loop between the covenant test and the loan it governs. When your borrower submits financials, Carta extracts and standardizes the metrics measured by covenants, tests them against the terms of the credit agreement, and determines consequences such as margin step-ups, PIK toggling, or penalty interest rates. Any outcomes are flagged for your approval before being applied to the loan and recorded in fund accounting, so your reports always match portfolio performance.
Why it matters
For private credit fund managers, manually monitoring covenants leads to undetected breaches and uncollected fees. Existing covenant monitoring solutions stop short, surfacing results but not acting on them. Because Carta holds both the covenant test and the loan, that step happens without a manual handoff, and on the schedule the credit agreement defines—so you can be confident your loans are always accurately priced.
How it works
Your borrowers will receive a link by email to submit their financial statements and custom metrics via a simple form—no account or login needed. You'll get a notification whenever a covenant consequence requires your confirmation, and can track current and historical test results in the covenant monitoring dashboard. Covenant monitoring is available to all Carta Loan Operations full-service customers as an add-on feature.
