Debt Service Coverage Ratio Calculator (DSCR)
Assess corporate debt repayment capacity and loan eligibility. The Debt Service Coverage Ratio (DSCR) calculates whether your net operating income (NOI) is sufficient to cover annual commercial loan principal and interest payments, representing the cornerstone metric of bank underwriting.
Operating revenue minus operating expenses, before debt and taxes
Total scheduled debt principal amortized across 12 months
Total interest expense paid on outstanding commercial debt
Dollars of operating cash flow available per $1.00 of required debt service
How to Use This Calculator
- Enter annual Net Operating Income (gross revenue minus operating expenses, excluding depreciation and financing).
- Enter total scheduled annual loan principal repayments.
- Enter total annual loan interest payments.
- Review your DSCR ratio: commercial lenders typically require a minimum DSCR of 1.25x.
Formula & Calculation Methodology
Compares operating cash flow against aggregate annual debt servicing obligations to test repayment security.
Worked Example
$180,000 NOI with $75,000 principal and $45,000 interest payments ($120,000 debt service)
Frequently Asked Questions
What is the minimum DSCR required by commercial banks?↓
Most commercial banks and SBA lenders mandate a minimum DSCR of 1.20x to 1.25x, ensuring the borrower generates at least 20% to 25% cash buffer above their debt payments to absorb revenue dips.
What happens if a company DSCR falls below 1.0x?↓
A DSCR below 1.0x means net operating income is insufficient to cover contractual debt payments. The company must tap cash reserves, borrow additional funds, or face loan default.
Why is principal included in DSCR but excluded from interest coverage?↓
Interest coverage only evaluates whether earnings cover income statement interest expense. DSCR measures full cash solvency by including cash principal amortization payments.
What is a DSCR loan in real estate investment?↓
In real estate, a DSCR loan qualifies the borrower based solely on the rental property cash flow and NOI rather than the personal income tax returns of the investor.
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Source Citation & Disclaimer
Informational tool only; not licensed tax, legal, or financial advice.