Debt Service Coverage Ratio (DSCR) Calculator

Our DSCR calculator enables you to calculate your company's debt service coverage ratio (DSCR) with ease. Simply complete the fields in the form below and click "Calculate" button.

For commercial lenders, the debt service coverage ratio, or DSCR, is the single-most significant element to take into consideration when analyzing the level of risk attached to an investment property or business. By calculating a DSCR, a lender will be able to determine whether the net income generated by a property or business will comfortably cover loan repayments, including payments on fees and interest as well as principal.

The importance of the DSCR to your prospective business loan is clear: it is the financial measurement used to decide whether you should receive a loan based on the level of cashflow your business generates and whether this is adequate to cover the loan costs.

A higher ratio equates to a lower level of risk, and as a general rule, lenders are looking for a DSCR of 1.25. However, a lower DSCR may be acceptable for certain lenders, while others may be looking for an even higher ratio.

DSCR Calculator

Net Operating Income (NOI):

Debt Service:

Calculating the DSCR

To calculate the DSCR, yearly net operating income (NOI) is divided by the yearly debt service of a property. The yearly debt service is equal to the total funds paid towards principal and interest repayments on all a property's loans over the course of a year. So, the calculation used to determine the DSCR can be expressed as follows:

Net Operating Income / Yearly Debt Service = DSCR

To illustrate, imagine a business has a total yearly debt service of $15,000 and generates a total yearly NOI of $19,500. In this instance, the company will have a DSCR of 1.3:

$19,500 / $15,000 = 1.3

DSCR Formula

We use the following formulas to determine the debt service coverage ratio:

Net Operating Income (NOI) = Gross Operating Income − Vacancy Loss − Operating Expenses

Debt Service = Yearly Loan Payments (Principal + Interest)

Debt Service = Loan Amount * Interest Rate / 100 / [1 - (1 + Interest Rate / 100 / 12) (-12 * Loan Term) )]

Debt Service Coverage Ratio (DSCR) = Net Operating Income / Debt Service

You may also be interested in our free Cap Rate Calculator

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