Debt Service Coverage Ratio (DSCR) Calculator
Calculate how well your business can service its debt and evaluate your financial health with this DSCR calculator.
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Results
Enter your values and click "Calculate" to see results
DSCR Formula
NOI Method
DSCR = Net Operating Income ÷ Total Debt Service
Total Debt Service = Principal + Interest + Lease Payments
The NOI method is commonly used for real estate and property-related businesses, where Net Operating Income represents revenue minus operating expenses (excluding debt payments).
EBITDA Method
DSCR = EBITDA ÷ Total Debt Service
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
The EBITDA method is commonly used for business loans and general corporate finance. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) measures a company's overall financial performance.
How to Use This Calculator
Select Method
Choose between NOI method (for real estate) or EBITDA method (for general business).
Enter Income
Input your business's Net Operating Income or EBITDA for the period.
Enter Debt Details
Add annual principal, interest payments, and optional lease payments.
Analyze Results
Review your DSCR value, risk assessment, and comparison with industry benchmarks.
Understanding Debt Service Coverage Ratio
What Is DSCR?
The Debt Service Coverage Ratio (DSCR) is a financial metric that measures a company's ability to service its current debt obligations with its available income. It's a critical indicator used by lenders and investors to assess a business's financial health and loan repayment capacity.
A DSCR of 1.0 means a company has exactly enough income to cover its debt payments. Higher ratios indicate better financial health, while ratios below 1.0 suggest potential financial distress.
Strong DSCR (> 1.25)
A DSCR above 1.25 indicates strong debt repayment capacity. The business generates significantly more income than needed for debt obligations, suggesting financial stability and potential for growth.
Benefits: Easier access to financing, lower interest rates, flexibility to take on additional debt if needed, and reduced financial stress.
Weak DSCR (< 1.0)
A DSCR below 1.0 indicates that the business doesn't generate enough income to cover its debt obligations, suggesting potential cash flow problems and financial distress.
Risks: Difficulty obtaining financing, higher interest rates on loans, potential default on existing debt, and possible need for asset liquidation to meet obligations.
Why DSCR Matters
For Lenders
Lenders use DSCR to assess credit risk and determine loan terms. Higher DSCR values typically result in more favorable lending conditions.
For Businesses
Businesses can use DSCR to monitor financial health, plan debt strategies, and ensure they maintain sufficient cash flow for operations and debt service.
For Investors
Investors analyze DSCR to evaluate financial risk and the company's ability to withstand economic downturns while meeting debt obligations.
Industry Benchmarks
DSCR requirements vary by industry and lender. Here are typical minimum DSCR values expected in different sectors:
Note: These are general ranges. Specific lenders may have different requirements based on risk assessment and economic conditions.
Frequently Asked Questions
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