Test date (covenant)
What is a covenant test date, and which numbers does it use?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A test date is the day at which a financial covenant is measured, usually each quarter end or half-year end, using the figures for the relevant period, often the twelve months to that date. The result is normally known only weeks later, when the accounts and compliance certificate arrive, so a breach can exist on paper well before anyone sees it. A balance-sheet test taken on a single day can also be flattered by collecting hard and paying late into that date, which is why a lender compares the test-date position with the months either side of it.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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- Covenant headroom
- Negative pledge
- Condition precedent (CP)
- Event of default
- Covenant waiver
- Reservation of rights
- Term sheet
- Condition subsequent
- Review event
- Repayable on demand
- Material adverse change (MAC) clause
- Cross-default
- Change of control clause
- Cure period
- Compliance certificate
- Information undertakings
- Liquidity covenant
- Equity cure
- Springing covenant
- Covenant reset
- Covenant mulligan
- Covenant-lite (cov-lite)
- Incurrence covenant
- Permitted baskets
- Distribution lock-up
- Mandatory prepayment
- Clean-up period
- Certain funds
- Yank-the-bank clause (replacement of lender)
- Capex covenant
- Guarantor coverage test
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