When an exporter's cash cycle runs on 90-day trade terms but the bank's revolving credit facility is structured around quarterly covenant tests, the two systems are almost never in the same conversation at the same time.
The exporter draws on the facility in January to fund raw material purchases. The covenant test lands in March, when the receivables haven't cleared yet. On paper, the leverage ratio looks worse than the underlying business warrants. The bank's credit team sees risk. The client sees a bank that doesn't understand seasonal trade.
Neither party is wrong. The problem is structural: the facility was designed for a smoother cash cycle than the one the business actually runs.
What changes the conversation is not reassurance—it's reframing the test date around the actual cash conversion cycle. A single adjustment to covenant timing often resolves what looked like a creditworthiness problem.
- Pattern
- Facility structure built for a generic borrower, not the actual cash cycle.
- Tension
- Risk assessment and operating reality measuring different things at the same moment.
- Lesson
- Before repricing or declining, ask whether the covenant date is the problem.