Debt Service Coverage Ratio (DSCR) Calculator
Calculate your debt service coverage ratio to see whether your business qualifies for a loan. Enter your revenue, expenses, and proposed loan terms to get your DSCR, lender threshold analysis, and maximum qualifying loan amount.
How to Use This Calculator
Start by entering your business financials. You can toggle between annual and monthly figures, whichever you have on hand. The calculator converts monthly inputs to annual automatically.
Revenue is your gross business revenue before any deductions. Operating expenses should include rent, payroll, utilities, insurance, inventory, supplies, and marketing, but exclude existing loan payments, depreciation, amortization, and owner draws.
Existing monthly debt payments captures what you already owe. Include all business loans, equipment leases, and recurring credit obligations. This lets the calculator compute your global DSCR, which is what lenders actually evaluate.
Then enter the proposed loan details: amount, interest rate, and term. The interest rate is pre-filled using the current Prime Rate plus a standard 3% spread. Adjust it to match your expected rate.
The results show your DSCR ratio, a pass/fail check against common lender thresholds, and the maximum loan amount you could qualify for at a conventional bank standard of 1.25x DSCR.
What Is DSCR and Why Lenders Require It
The debt service coverage ratio measures whether your business generates enough income to cover its debt payments. The formula is straightforward:
DSCR = Net Operating Income / Total Annual Debt Service
A DSCR of 1.00x means your business earns exactly enough to cover its debt, with nothing left over. That is breakeven, and no lender will approve a loan at that level because there is zero margin for a bad month.
Most conventional banks require at least 1.25x, meaning your NOI must be 25% higher than your total debt payments. The SBA sets a lower floor at 1.15x for 7(a) loans, though individual SBA lenders may require more. Online and alternative lenders sometimes approve at 1.0x to 1.15x, but those loans carry significantly higher rates to compensate for the added risk.
DSCR is not just a qualification hurdle. It directly influences the loan amount you can get. A business with strong revenue but heavy existing debt will have a lower DSCR than the same revenue with no existing obligations. That is why this calculator includes existing debt payments: lenders look at total debt service, not just the proposed loan in isolation.
How to Calculate Your NOI for Lending Purposes
Net Operating Income (NOI) for lending purposes is not the same as your net income on a tax return. Lenders start with gross revenue and subtract only cash operating expenses. Here is what to include and exclude:
Include in operating expenses:
- Rent and occupancy costs
- Payroll and employee benefits (excluding owner compensation adjustments)
- Utilities, insurance, and taxes (property, not income)
- Cost of goods sold and inventory
- Marketing and advertising
- Professional services (accounting, legal)
- Supplies and maintenance
Exclude from operating expenses (these get added back):
- Existing loan and lease payments (enter these separately)
- Depreciation and amortization (non-cash charges)
- Income taxes
- Owner draws, distributions, and excess owner compensation
- One-time or non-recurring expenses
SBA lenders specifically add back depreciation, amortization, and owner compensation above a market-rate salary when calculating the cash flow available for debt service. If you are applying for an SBA loan, your effective NOI may be higher than a simple revenue-minus-expenses calculation.
See lenders that fit your DSCR profile and business financials. No obligation, no impact on your credit.
Get a Financing AssessmentFrequently Asked Questions
What is a good DSCR for a business loan?
Most conventional banks require a minimum DSCR of 1.25x, meaning your net operating income must be at least 25% higher than your total debt payments. SBA 7(a) loans have a lower minimum of 1.15x, set by SBA Standard Operating Procedures. A DSCR above 1.50x is considered strong and positions a borrower for better rates and terms. Below 1.0x means the business cannot cover its debt from operations.
What operating expenses should I exclude from the NOI calculation?
Exclude existing debt payments (loan principal and interest, equipment lease payments), depreciation, amortization, income taxes, owner draws and distributions, and any one-time or non-recurring expenses. These are either non-cash items or obligations that the DSCR formula handles separately in the denominator. Including them in operating expenses would double-count debt service and understate your actual cash flow.
What happens if my DSCR is below 1.0?
A DSCR below 1.0x means the business does not generate enough income to cover its debt payments from operations alone. No traditional lender will approve a loan in this position because it would require drawing on reserves, owner contributions, or external sources to make payments. If your DSCR is below 1.0x, focus on increasing revenue, reducing operating expenses, or restructuring existing debt before applying for new financing.
Can I improve my DSCR to qualify for a larger loan?
Yes. DSCR improves when NOI increases or total debt service decreases. Common strategies include: increasing revenue through pricing or volume, reducing operating expenses, paying off or refinancing existing debt to lower monthly payments, extending the proposed loan term (which lowers the monthly payment and reduces annual debt service), or choosing a lower interest rate product. The qualifying analysis section of this calculator shows exactly how much additional NOI you would need.
Do different loan types require different DSCRs?
Yes. SBA 7(a) loans require a minimum of 1.15x per SBA guidelines, though individual SBA lenders often set their own floors at 1.20x or 1.25x. Conventional bank term loans and lines of credit typically require 1.25x. Commercial real estate loans range from 1.20x to 1.50x depending on property type and market conditions. Online and alternative lenders may approve at 1.0x to 1.15x, but compensate with significantly higher interest rates.
Does DSCR include personal income or personal debt?
This calculator computes business DSCR using business financials only. However, many lenders, particularly SBA lenders, also calculate a global DSCR (sometimes called personal cash flow analysis) that includes the owner's personal income, living expenses, and personal debt obligations. If your business DSCR is borderline, strong personal income can help, but weak personal cash flow can hurt even if the business numbers look solid.
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