Check if your business earns enough to pay back its loans
Calculated DSCR
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Enter details to see loan eligibility
How to use the DSCR Calculator
The Debt Service Coverage Ratio (DSCR) measures a firm's available cash to pay current debt obligations. To use this tool, enter your **Net Operating Income (NOI)**—which is your revenue minus operating expenses (but before taxes and interest). Then, enter your total annual **Principal** and **Interest** payments (Total Debt Service). A DSCR of less than 1.0 means a negative cash flow (you can't cover the debt), while a ratio above 1.25 is typically what banks look for before approving a commercial loan.
- Lender's Safety Net: Banks use this to ensure you have a "buffer." If your business has a bad month, can you still pay the bank?
- Investment Property: Real estate investors use DSCR to see if the rent from a building covers its mortgage.
- Borrowing Power: Improving your DSCR (by increasing income or reducing expenses) directly increases the amount of money a bank will lend you.
What is a "Good" DSCR? +
Most lenders look for a DSCR of 1.25 or higher. This means for every $1 you owe in debt, you earn $1.25 in operating profit. A ratio of 1.0 means you are "Breakeven," which is risky for a bank.
What if my DSCR is below 1.0? +
This means the business is not generating enough cash to pay its debts. You would likely need to use personal savings or take on more equity partners to stay afloat.
How can I improve my DSCR? +
You can improve it by increasing your revenue, cutting operating costs, or refinancing your debt to get a lower interest rate or a longer repayment term.
Does DSCR include personal expenses? +
Usually, no. It focuses strictly on the business's ability to pay its own debt. However, for small sole proprietorships, banks might look at "Global DSCR," which includes personal income and debt.
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