Liquidity forecast and covenant headroom
Cash, availability, headroom, shortfall.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: liquidity forecast and covenant headroom.Updated 30 September 2026
Part of credit and restructuring models, with the models, labs and guides around it.
What it does
The cash roll-forward and what it means. Opening cash plus receipts less disbursements gives cash before the revolver; the revolver draws only what holds the minimum operating balance, limited to availability, and repays from cash above it; liquidity is closing cash plus what is left to draw. The covenant is tested on liquidity every week, and a shortfall, cash below the minimum with nothing left to draw, is the amount new money must supply.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 6–9: Opening cash, Opening revolver balance, Opening trade receivables, Inventory
- Liquidity, rows 6–10: Opening cash, Receipts, Disbursements, Net cash flow before revolver…
- Liquidity, rows 20–25: Draw needed for minimum cash, Revolver draw, Revolver repayment, Mandatory repayment to borrowing base…
- Liquidity, rows 28–34: Available borrowing, Total liquidity, Covenant headroom, Covenant breach flag…
- Summary, rows 5–13: Net cash flow before revolver, 13 weeks, Minimum total liquidity, Minimum-liquidity week, Peak revolver balance…
What a reviewer looks for
- A covenant tested on cash alone.
- A revolver that draws to its commitment on day one.
- A shortfall funded by a negative cash balance nobody notices.
Learn it, then build it
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Credit and Covenant Modelling: What a Lender Actually Tests
Vocabulary: Liquidity, Covenant, 13-Week Cash Flow.