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DSCR Calculator
The number a lender checks before almost anything else. Enter your net operating income and your annual debt service to find your debt service coverage ratio — and see instantly whether you clear the 1.25× bar most SBA and commercial lenders require.
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→ Your coverage ratio
Clears the lender threshold
A DSCR of 1.50× means you earn $1.50 for every $1 of debt payment. SBA and commercial lenders typically require at least 1.25×. You have a cushion underwriters like to see.
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An estimate for planning, not a lending decision. Lenders define net operating income and debt service in specific ways — confirm with your lender.
What is the debt service coverage ratio?
The debt service coverage ratio (DSCR) measures whether a business generates enough income to cover its loan payments. It divides net operating income by total debt service, so a DSCR of 1.25 means the business earns $1.25 for every $1 it owes in principal and interest. It is the number lenders reach for first, because it answers the only question that ultimately matters in underwriting: after the bills are paid, is there enough left to service the debt with room to spare?
How DSCR is calculated
- DSCR = Net operating income ÷ Total annual debt service
- Net operating income ≈ revenue − operating expenses (before interest, taxes, depreciation)
- Debt service = annual principal + interest on all loans
A worked example
With $180,000 of net operating income and $120,000 of annual debt service, your DSCR is 180,000 ÷ 120,000 = 1.50× — comfortably above the 1.25× most lenders want, leaving $60,000 of cushion. Drop NOI to $130,000 and the ratio falls to about 1.08×, which most underwriters would decline.
What DSCR do lenders require?
Most SBA and commercial lenders set a floor of 1.25×, which builds in a 25% cushion against a downturn. Stronger borrowers or lower-risk deals may pass at 1.15×; riskier industries or startups can be held to 1.35× or higher. A DSCR at or below 1.0× means the business does not generate enough to cover its debt, and is almost always a decline. Because the ratio drives the decision, it is worth calculating before you apply — and fixing it first if it falls short.
How to improve your DSCR
Coverage moves from either side of the ratio. On the income side, growing revenue or trimming operating costs lifts net operating income directly. On the debt side, borrowing less or stretching the term lowers each year's payment — though a longer term means more total interest over the life of the loan. Underwriters also allow certain non-cash and one-time expenses to be added back to income, so before you conclude you fall short, confirm exactly how your lender defines the numerator.
Global vs. business DSCR
For owner-operated and SBA loans, lenders often calculate a global DSCRthat combines the business's cash flow and the owner's personal income and debts, since the two are entangled. A business that passes on its own can still be declined if the owner's personal obligations are heavy — and vice versa. If you are borrowing personally guaranteed money, expect the lender to look at the whole picture, not just the company's statements.
DSCR works hand in hand with your loan terms — model the payment side with the business loan calculator, and see what underwriters weigh in our guide to SBA loan requirements.
→ Beyond the calculator
Build a loan package that underwrites cleanly
A strong DSCR is one line in a loan file. We write the SBA business plan and lender-formatted financials — use of funds, projections, and a DSCR that holds up — so your application answers the underwriter's questions before they ask.
Frequently asked questions
- DSCR = Net Operating Income ÷ Total Debt Service. Net operating income is your annual income after operating expenses but before debt payments, interest, and taxes; total debt service is the annual principal plus interest on all your loans. A DSCR of 1.25 means you earn $1.25 for every $1 of debt payment.
- Most SBA and commercial lenders want a DSCR of at least 1.25×, giving a 25% cushion above the debt payment. Some require 1.15× for stronger borrowers or up to 1.35×+ for riskier deals. Below 1.0× the business doesn't generate enough to cover its debt, which is usually a decline.
- Raise net operating income (grow revenue or cut operating costs), reduce the loan amount, or extend the term to lower the annual payment. Lenders also let you add back certain non-cash or one-time expenses to NOI — check how your lender defines it.
- Broadly, revenue minus operating expenses, excluding interest, taxes, depreciation, and amortization — close to EBITDA. Definitions vary by lender (some adjust for owner salary or one-offs), so confirm the exact formula your lender uses before relying on a number.
- Yes — it runs in your browser, nothing is stored, and there's no sign-up. When you need a loan package with lender-formatted financials and a DSCR that underwrites cleanly, that's what our SBA business plan service builds.