DSCR Calculator: Debt Service Coverage Ratio
Find out whether your income covers a new loan payment before a lender does. Enter three numbers to see your current and projected DSCR, plus the total annual debt your income supports. Free, instant, no signup.
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Debt Service Coverage Ratio Calculator
Three inputs: what you earn, what you already pay, and the payment you’re considering.
What is a debt service coverage ratio?
DSCR measures how many times your business’s annual operating income covers its annual debt payments. A DSCR of 1.0x means income exactly equals debt service; anything above 1.0x is cushion. Lenders use it to judge whether a business can absorb a new payment without straining cash flow.
How do you calculate DSCR?
Divide annual net operating income by total annual debt service. To project the ratio after a new loan, add the proposed annual payment to your current debt service and divide again. The calculator above also inverts the formula, dividing income by 1.25, to show the total payments a 1.25x standard supports.
Worked example (the calculator’s defaults):
- Annual net operating income: $150,000
- Current annual debt payments: $60,000, so current DSCR = $150,000 ÷ $60,000 = 2.50x
- Proposed payment: $2,500/month × 12 = $30,000/year
- Projected DSCR = $150,000 ÷ ($60,000 + $30,000) = $150,000 ÷ $90,000 = 1.67x
- Max total annual debt service at 1.25x = $150,000 ÷ 1.25 = $120,000
- Headroom vs. current payments = $120,000 - $60,000 = $60,000
What DSCR do lenders look for?
Many lenders look for roughly 1.25x or better, though the bar varies by lender, product, and industry. Below 1.0x, income doesn’t cover the payments on paper. Between 1.0x and 1.25x is often read as borderline: fundable, but with little margin for a slow month or a surprise expense.
Coverage is rarely the whole story. Underwriters also weigh time in business, deposit consistency, industry, and seasonality, which is why two businesses with identical ratios can get different answers. If a new payment would push your ratio into the borderline zone, comparing structures side by side helps: our guide to comparing business funding options and the MCA vs. term loan vs. line of credit breakdown show how the same dollar amount can carry very different payment shapes.
How is revenue-based funding different from DSCR underwriting?
Revenue-based funding is typically underwritten on your actual bank deposits, not a coverage ratio built from financial statements. Underwriters read your last 4 months of bank statements to size an offer around real cash flow, so steady deposits can matter more than a textbook DSCR.
That difference is why owners who don’t clear a bank’s coverage bar still get funded. A term loan gives you a fixed payment that slots neatly into a DSCR calculation, while deposit-based products size remittances to revenue instead. To see exactly what underwriters pull from your statements, read what underwriters look for in your bank statements, then run your own numbers above before you apply.
When Checking Your DSCR Leads to Funding
Owners usually run this ratio right before a real decision. Here’s where to go next.
If your projected coverage looks comfortable, a term loan gives you the full amount up front with a fixed schedule your DSCR already accounts for. If you’d rather keep the ratio untouched until you actually need the money, a business line of credit only adds debt service on what you draw. And if the ratio is tight but your deposits are steady, deposit-based options like a merchant cash advance are sized to revenue rather than a coverage formula: tighter credit profiles included.
Want the payment side of the equation first? Estimate one with the business funding calculator, browse all the free tools on the business calculators hub, or brush up on working capital before you commit to anything.
DSCR Calculator FAQs
What is a good DSCR for a business loan?
Many lenders look for roughly 1.25x or better, meaning annual operating income runs about 25 percent larger than annual debt payments. Standards vary by lender, product, and industry, so treat any single benchmark as a guide rather than a rule. A ratio above 1.0x means income covers payments; the cushion beyond that is what underwriters want to see before adding a new obligation.
How do you calculate debt service coverage ratio?
Divide annual net operating income by total annual debt service: every principal and interest payment the business owes for the year. For example, $150,000 of operating income against $90,000 in annual payments is a DSCR of 1.67x. The calculator on this page runs that math instantly and also stress-tests the ratio with a proposed new payment added on top.
What counts as debt service?
Total annual principal and interest across everything the business repays: term loans, equipment financing, draws on a line of credit, vehicle notes, and daily or weekly remittances on advances. Use the full year of payments, not one month. Some lenders also fold in leases or owner obligations (a global DSCR), so ask how yours defines it before comparing ratios.
What is net operating income for DSCR?
Revenue minus operating expenses, measured before debt payments and often before interest, taxes, depreciation, and amortization (EBITDA is a common stand-in). The goal is to capture the cash the business generates that is available to service debt. Pull the figure from your profit and loss statement and use the same 12-month window as your debt numbers.
Do revenue-based funding options use DSCR?
Usually not the way banks do. Revenue-based products such as merchant cash advances are typically underwritten on your actual bank deposits, drawn from your last 4 months of bank statements, rather than a coverage ratio built from financial statements. That is why a business with a tight DSCR but steady deposits can still qualify. See how underwriters read your bank statements.
Is this DSCR calculator an offer or financial advice?
No. It is exact arithmetic on the numbers you enter, but it is for illustration only, not an offer, quote, or financial advice. Lenders define income and debt service differently and may apply adjustments this tool cannot see. For a real answer, apply online in under 3 minutes: checking your options never affects your credit, and offers come back within hours.
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Plain-English definitions, including DSCR.
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Read the guide →Want Your DSCR Numbers in Your Inbox?
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