DSCR Calculator: Debt Service Coverage Ratio
Calculate debt service coverage ratio for commercial loans. Determine loan sizing, required NOI, and see how your DSCR compares to lender requirements.
Gross income minus operating expenses (before debt service)
1.77x
Strong
Favorable terms likely - excellent debt coverage
Annual Debt Service
$84,814
Monthly Payment
$7,068
Max Loan at 1.25x DSCR
$1,414,869
You could borrow $414,869 more
Required NOI for 1.25x DSCR
$106,017
Current NOI exceeds requirement by $43,983
20 years
$93,036/year
1.61x
Strong
25 years
$84,814/year
1.77x
Strong
30 years
$79,836/year
1.88x
Strong
<0.0x - 1.0x
Loan unlikely - insufficient income to cover debt
1.0x - 1.1x
High risk - requires strong sponsor or additional collateral
1.1x - 1.3x
Minimum for most lenders - limited cushion
1.3x - 1.5x
Standard requirement - comfortable debt coverage
1.5x+
Favorable terms likely - excellent debt coverage
Common Lender DSCR Requirements:
Debt Service Coverage Ratio (DSCR) is a financial metric that measures a property's or business's ability to cover its debt obligations with its operating income. Lenders use DSCR to evaluate loan applications and determine how much they're willing to lend. A DSCR of 1.0 means the income exactly covers the debt payments, while a higher ratio indicates better ability to service debt.
Formula:
DSCR = Net Operating Income (NOI) / Total Debt ServiceNet Operating Income is your gross income minus operating expenses (but before debt payments). Total Debt Service includes all principal and interest payments.
- 1
Enter your annual Net Operating Income (NOI) - this is gross revenue minus operating expenses
- 2
Input your annual debt service amount (total of all loan payments for the year)
- 3
The calculator instantly shows your DSCR ratio
- 4
Compare your result against lender requirements and industry benchmarks
- 5
Adjust inputs to see how changes affect your qualification
- Lenders require minimum DSCR ratios (typically 1.20-1.50) to approve commercial loans
- A higher DSCR means lower risk and potentially better loan terms
- Understanding DSCR helps you structure deals that banks will actually fund
- DSCR is often the binding constraint in commercial real estate loan sizing
- Monitoring DSCR helps prevent loan defaults and covenant violations
- Analyzing a commercial real estate acquisition
- Refinancing an existing property
- Preparing a loan application
- Evaluating investment returns vs. debt capacity
- Stress-testing deals under different scenarios
- Comparing financing options
- •Most lenders use a 'global DSCR' that includes all borrower debts, not just the property
- •DSCR requirements increase during economic uncertainty
- •A DSCR of 1.25 means you have a 25% cushion above your debt payments
- •Some loan programs allow interest-only periods which temporarily boost DSCR
Understanding DSCR: Complete Guide for Commercial Lenders
Deep dive into DSCR calculations, requirements, and strategies
CRE Loan Underwriting: Key Metrics Every Lender Must Know
How DSCR fits with LTV, debt yield, and cap rate in underwriting
Cap Rate vs DSCR vs Debt Yield: Which Metric Matters Most?
When to prioritize each metric in your analysis
Loan Sizing Calculator
Determine maximum loan amount based on DSCR, LTV, and debt yield constraints
Try Calculator →Cap Rate Calculator
Calculate capitalization rate for property valuation
Try Calculator →Debt Yield Calculator
Calculate debt yield - another key metric lenders use
Try Calculator →Commercial Loan Amortization
Generate amortization schedules for commercial loans
Try Calculator →Have questions about using this calculator? Check out our financial guides or contact us for help.
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Frequently Asked Questions
What is Debt Service Coverage Ratio (DSCR)?
DSCR measures a property's or business's ability to pay its debt obligations. It's calculated by dividing Net Operating Income (NOI) by total debt service (principal + interest payments). A DSCR of 1.25x means the property generates 25% more income than needed to cover debt payments.
What is a good DSCR for commercial loans?
Most lenders require a minimum DSCR of 1.20x to 1.25x for commercial real estate loans. Strong deals typically have DSCR of 1.35x or higher. SBA loans may require 1.15x minimum. The higher the DSCR, the lower the risk and potentially better loan terms.
How do lenders use DSCR in loan decisions?
Lenders use DSCR as a primary metric to determine loan sizing, interest rates, and approval. A higher DSCR may qualify you for larger loans, lower rates, and better terms. It's often used alongside LTV (Loan-to-Value) and Debt Yield to size loans.
What's the difference between DSCR and interest coverage ratio?
DSCR includes both principal and interest payments in its calculation, providing a complete picture of debt obligations. Interest Coverage Ratio (ICR) only considers interest payments. DSCR is more conservative and commonly used for commercial real estate lending.
How can I improve my DSCR?
Improve DSCR by increasing NOI (raising rents, reducing expenses) or reducing debt service (lower interest rate, longer amortization, smaller loan amount). A 30-year amortization vs. 25-year can significantly improve DSCR on the same loan amount.