Debt Service Coverage Ratio (DSCR) Calculator

Professional-grade financial analysis tool for commercial lenders, real estate investors, and business owners to evaluate loan eligibility and cash flow health.

Calculate Your DSCR

$
Annual income from operations after operating expenses
$
Total annual principal and interest payments

DSCR Analysis Results

Your Debt Service Coverage Ratio
1.50
Strong - Good loan eligibility
$150,000
Net Operating Income
$100,000
Annual Debt Service
Based on your inputs, your DSCR of 1.50 indicates strong cash flow coverage. Most commercial lenders require a minimum DSCR of 1.25 for loan approval[citation:6].

Understanding Debt Service Coverage Ratio (DSCR)

The Debt Service Coverage Ratio (DSCR) is a critical financial metric used by lenders and investors to assess a business or property's ability to cover its debt obligations with its operating income. This ratio is particularly important in commercial lending, where it serves as a key indicator of loan repayment risk[citation:6].

DSCR = Net Operating Income (NOI) ÷ Annual Debt Obligations

How Lenders Interpret Your DSCR

DSCR > 1.25: Strong position - Indicates sufficient cash flow to cover debt payments with a safety margin. Most lenders require at least 1.25x for commercial loans[citation:6].

DSCR 1.00 - 1.25: Marginal position - Cash flow barely covers debt payments. May require additional collateral or guarantees.

DSCR < 1.00: High risk - Insufficient cash flow to cover debt obligations. Loan approval unlikely without significant mitigating factors.

Global DSCR vs. Property DSCR

In some lending scenarios, particularly for small business commercial property loans and smaller multifamily loans, lenders may analyze what's known as Global DSCR. This metric accounts for the borrower's personal income and debts in addition to the property's income and obligations[citation:6]. A borrower with strong personal finances may have a higher Global DSCR than their property-specific DSCR, potentially improving loan eligibility.

Industry-Specific DSCR Requirements

Different industries and property types have varying DSCR expectations from lenders. Multifamily properties often have lower requirements (1.20x) due to stable cash flows, while hospitality or retail properties may require higher ratios (1.35x+) due to greater volatility. Always check with your specific lender for their underwriting standards.

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DSCR Calculator FAQ

What is a good DSCR ratio for loan approval?
Most commercial lenders require a minimum DSCR of 1.25x for loan approval, though this can vary by property type and lender[citation:6]. A ratio of 1.25 means the property generates 25% more income than needed to cover its debt payments. Higher ratios (1.35x-1.50x+) are preferred and may qualify for better loan terms.
How does DSCR differ from debt-to-income (DTI) ratio?
DSCR focuses on cash flow from a specific property or business relative to its debt payments, while DTI compares an individual's total monthly debt payments to gross monthly income. DSCR is standard for commercial lending, while DTI is more common for residential mortgages and personal loans.
What's included in Net Operating Income (NOI) for DSCR calculation?
NOI includes all property income (rents, parking fees, laundry income) minus operating expenses (property taxes, insurance, maintenance, utilities, management fees). It does NOT include debt service, capital expenditures, depreciation, or income taxes. Accurate NOI calculation is critical for reliable DSCR analysis.
Can I improve my DSCR if it's too low for loan approval?
Yes, several strategies can improve your DSCR: 1) Increase property income through rent increases or reduced vacancies, 2) Reduce operating expenses through efficiency improvements, 3) Make a larger down payment to reduce loan amount, 4) Extend loan term to lower monthly payments, 5) Add personal guarantees or additional collateral.
What is Global DSCR and when is it used?
Global DSCR accounts for both the property's cash flow AND the borrower's personal income and debts[citation:6]. Lenders may use this for smaller commercial loans or when the property DSCR is marginal. A borrower with strong personal finances might have a higher Global DSCR, potentially improving loan eligibility despite a lower property-specific DSCR.
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