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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.

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Results are for informational purposes only. Always verify with a qualified professional.

⚠️ Please fill in all required fields with valid numbers.

Everyday Uses

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Loan approval odds

Lenders typically want DSCR above 1.25 — check yours before applying.

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Rental property vetting

See whether a property's income actually covers its mortgage payments.

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Debt load warning

A DSCR drifting toward 1.0 means debt payments are eating all your cash flow.

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Can cash flow carry the new loan

Test whether cash flow can support the new loan before signing it.

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The covenant in the agreement

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.

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Stress-testing a rental property

Recalculate with two months of vacancy and a rate rise applied together. Whatever margin disappears is the risk you were carrying without seeing it.

Frequently Asked Questions

What is the DSCR formula?

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.

What counts as Net Operating Income for DSCR?

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.

What is a good DSCR?

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.

Why do lenders care so much about DSCR?

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.

How can a business improve its DSCR?

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.

How is DSCR different from the interest coverage ratio?

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.