DSCR Calculator
Divide net operating income by annual debt service to get a debt service coverage ratio, and see where it sits against the minimum most commercial lenders set.
Operating income after operating expenses, before debt service, tax and capital expenditure.
Twelve months of principal plus interest across all debt being covered.
DSCR
1.25x
Meets a typical covenant
At or above the 1.25x minimum commonly set in commercial credit policy.
$250,000 ÷ $200,000 = 1.25x. Every $1.00 of debt service is covered by $1.25 of operating income.
How the ratio is read
| DSCR | How a credit team usually reads it |
|---|---|
| Below 1.0x | Operating income does not cover debt service from operations. |
| 1.0x to 1.20x | Covers debt service, but below the minimum most lenders set. |
| 1.20x to 1.25x | The band commercial credit policy is usually written around. |
| 1.5x and above | Generally reads as strong coverage. |
These are conventions rather than rules. Policy varies by lender, asset class and facility, and SBA deals are assessed on a global DSCR across the borrower and any guarantors. For the definition and where the figure comes from, see what DSCR means, and how to calculate it on a commercial loan for worked examples.
Frequently asked questions
How do you calculate DSCR?
DSCR = Net Operating Income (NOI) ÷ Annual Debt Service. For example, a business with $250,000 in NOI and $200,000 of annual principal and interest has a DSCR of 1.25x. Debt service covers twelve months of principal plus interest across the debt being measured.
What is a good DSCR?
Most commercial lenders require a minimum of 1.20x to 1.25x. A DSCR of 1.25x means the business generates $1.25 of operating income for every $1.00 of debt service. Anything at 1.5x or above generally reads as strong, and below 1.0x means operating income does not cover debt payments.
What DSCR do SBA loans require?
SBA 7(a) and 504 loans typically require a minimum global DSCR of 1.15x to 1.25x, calculated across all business and personal debt obligations of the borrower and any guarantors. Individual lenders often apply stricter overlays on top of that.
What is the difference between DSCR and global DSCR?
DSCR measures a single entity's operating income against its own debt service. Global DSCR combines the business and its guarantors, covering personal debt and other entities, which is why an SBA or owner-operator deal is usually assessed globally rather than on the operating company alone.
Can DSCR be calculated automatically from financial statements?
Yes. AI credit analysis platforms extract income and expense data from submitted statements, calculate DSCR across multiple periods, flag covenant breaches, and carry the workings into the credit memo, which removes the manual re-keying this calculator stands in for.
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