Debt Service Coverage Ratio (DSCR) Calculator
Calculate the Debt Service Coverage Ratio (DSCR) from net operating income and total debt payments to see if cash flow covers debt obligations.
Calculate the Debt Service Coverage Ratio (DSCR) from net operating income and total debt payments to see if cash flow covers debt obligations.
Lenders typically want DSCR above 1.25 — check yours before applying.
See whether a property's income actually covers its mortgage payments.
A DSCR drifting toward 1.0 means debt payments are eating all your cash flow.
Test whether cash flow can support the new loan before signing it.
Lenders commonly write a minimum coverage ratio into the loan contract. Breaching it can constitute default even while every payment is being made on time.
Recalculate with two months of vacancy and a rate rise applied together. Whatever margin disappears is the risk you were carrying without seeing it.
DSCR = Net Operating Income (NOI) ÷ Total Debt Service, where Total Debt Service = Annual Principal Repayment + Annual Interest Payments. It shows how many times over a business or property's operating income can cover its required debt payments for the year.
NOI is income from core operations before debt service: for a business, typically EBITDA or operating income; for real estate, rental income minus operating expenses (but before mortgage payments). It excludes financing costs, taxes, and non-operating items, since DSCR specifically measures whether operations generate enough cash to service debt.
A DSCR below 1.0 means operating income isn't enough to cover debt payments — a red flag. Most commercial lenders want at least 1.25, meaning income exceeds debt payments by 25%. SBA loans often accept 1.15+, while conservative lenders or riskier deals may require 1.35 or higher.
DSCR directly answers the question a lender cares about most: can this borrower's cash flow actually cover the loan payments, with some cushion for a downturn? Unlike a credit score or collateral value, DSCR is forward-looking and tied to the income the loan itself depends on, which is why it's a standard underwriting requirement for commercial and real estate loans.
Increase net operating income (raise revenue, cut operating costs, improve margins), or reduce total debt service by refinancing to a lower rate, extending the loan term to lower payments, or paying down principal on other debt first to reduce overall obligations.
Interest coverage ratio (EBIT ÷ Interest Expense) only measures the ability to cover interest payments. DSCR is stricter — it includes both interest AND scheduled principal repayment in the denominator, giving a more complete picture of whether cash flow can meet the full debt obligation, not just the interest portion.