DSCR Calculator
Calculate the debt service coverage ratio to determine if a property or business generates enough income to cover its loan payments. Enter your net operating income and total debt service to see your DSCR and whether it meets typical lender requirements.
DSCR = net operating income / total debt service. With $250,000 in annual NOI and $180,000 in debt payments, the DSCR is 1.39x. That means for every $1 of debt obligation, the property or business generates $1.39 in operating income.
Most commercial lenders require a minimum DSCR of 1.25x, meaning 25% more income than what is needed for debt payments. SBA loans typically require 1.15x-1.25x, while conventional commercial real estate loans want 1.20x-1.35x. Higher DSCRs get better loan terms, lower rates, and larger loan amounts.
If your DSCR falls below the lender's threshold, you have a few options: increase the down payment to reduce the loan amount, negotiate a lower purchase price, find ways to increase the property's NOI (raise rents, reduce expenses), or extend the loan term to lower annual payments. The calculator shows the maximum debt service your NOI supports at a 1.25x DSCR to help you size the right loan.