# DSCR Calculator

Calculate the debt service coverage ratio (DSCR) for commercial real estate and business loans. Lenders require DSCR of 1.25x or higher.

## What this calculates

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.

## Inputs

- **Net Operating Income (NOI)** ($) — min 0 — Annual net operating income (revenue minus operating expenses, before debt payments).
- **Annual Debt Service** ($) — min 0 — Total annual loan payments (principal + interest for all debts).

## Outputs

- **DSCR** — Debt service coverage ratio. 1.25x or higher is typically required.
- **Excess (or Shortfall)** — formatted as currency — NOI minus debt service. Positive means income exceeds payments.
- **Max Debt Service at 1.25x DSCR** — formatted as currency — The maximum annual debt payment your NOI can support at a 1.25x DSCR.
- **Lender Assessment** — formatted as text — How lenders would view this DSCR.

## Details

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.

## Frequently Asked Questions

**Q: What is a good DSCR?**

A: A DSCR of 1.25x is the typical minimum for commercial loans. Between 1.25x and 1.50x is considered adequate. Above 1.50x is strong and usually qualifies for better interest rates. A DSCR below 1.0x means the property or business cannot cover its debt payments from operations, which is a deal-breaker for most lenders.

**Q: What is included in net operating income (NOI)?**

A: NOI is gross revenue minus operating expenses. For real estate, it includes rental income minus property taxes, insurance, maintenance, management fees, and utilities. It does not include debt payments (principal or interest), capital expenditures, depreciation, or income taxes. NOI represents the property's income before financing costs.

**Q: How do I improve my DSCR?**

A: You can improve DSCR by increasing NOI or decreasing debt service. On the income side, raise rents, reduce vacancies, or cut operating expenses. On the debt side, make a larger down payment, extend the loan term, or refinance at a lower interest rate. Even small improvements to NOI can significantly move the ratio.

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Source: https://vastcalc.com/calculators/finance/debt-service-coverage
Category: Finance
Last updated: 2026-04-08