Free DSCR Calculator
Debt Service Coverage Ratio Calculator
Enter net operating income and annual debt service to calculate DSCR instantly. See whether the deal clears your policy minimum and the maximum debt service the cash flow supports.
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LendPipe pulls NOI and debt service straight from spread tax returns and financial statements — no manual re-keying.
See automated spreadingThe DSCR formula
Debt service coverage ratio measures how many times a property or business covers its debt payments out of operating cash flow. It is the single most common screening metric in commercial lending:
DSCR = Net Operating Income ÷ Annual Debt Service
A DSCR of 1.25x means the borrower generates $1.25 of cash for every $1.00 of debt service — a 25% cushion. At 1.0x there is no margin, and below 1.0x the cash flow does not cover the payments.
Worked example
A small multifamily property generates $250,000 in net operating income per year. The proposed loan carries $185,000 in annual principal and interest. Its DSCR is:
$250,000 ÷ $185,000 = 1.35x
Against a 1.25x policy minimum, this clears with room to spare. At the 1.25x target, this NOI could actually support up to $200,000 of annual debt service — useful for sizing the maximum loan amount.
What counts as a good DSCR
- 1.25x and above — clears most commercial real estate credit policies.
- 1.0x to 1.24x — covers debt but thin; often needs mitigants or a smaller loan.
- Below 1.0x — cash flow does not cover debt service; rarely approvable on capacity alone.
Thresholds vary by program and property type. SBA and conventional business loans typically underwrite to a global DSCR that folds in the owner's personal obligations — see the difference explained in the FAQ below.
Common mistakes
- Using gross income instead of net operating income — operating expenses must be deducted first.
- Counting only interest and forgetting principal in the debt service figure.
- Ignoring existing debt the borrower already carries on other obligations.
Frequently asked questions
What is the DSCR formula?
DSCR = Net Operating Income ÷ Total Annual Debt Service. Net operating income is income after operating expenses but before debt payments and income tax. Total annual debt service is the full principal and interest due over the year on the proposed loan plus any existing debt being carried. A DSCR of 1.0 means the property or business generates exactly enough cash to cover its debt payments, with nothing left over.
What is a good DSCR for a commercial loan?
Most commercial real estate lenders require a minimum DSCR of 1.20 to 1.35, with 1.25 being the most common threshold. A DSCR above the minimum means there is a cash cushion above the debt payments. Stabilized, lower-risk property types may be approved closer to 1.20, while higher-risk or transitional assets often require 1.30 or higher. SBA and conventional business loans frequently use a 1.15 to 1.25 global DSCR that includes the owner's personal obligations.
What does a DSCR below 1.0 mean?
A DSCR below 1.0 means net operating income is not enough to cover the annual debt service — the borrower would have a cash shortfall and need to fund the gap from reserves or outside income. Lenders almost never approve a loan at a sub-1.0 DSCR on debt-service capacity alone, because there is no margin to absorb vacancy, rate changes, or expense increases.
What is the difference between DSCR and global DSCR?
Property-level (or business-level) DSCR looks only at the income and debt service of the subject property or operating entity. Global DSCR consolidates all of a borrower's and guarantor's income and debt obligations — personal, real estate, and affiliated entities — into a single ratio. Global DSCR is standard for SBA loans and any borrower with ownership in multiple entities, because it shows whether total cash flow covers total debt.
How do I lower or improve a DSCR?
DSCR improves when net operating income rises or annual debt service falls. On the income side that means higher rents, lower vacancy, or reduced operating expenses. On the debt side it means a smaller loan amount, a lower interest rate, or a longer amortization period — each of which reduces the annual payment. The calculator above shows the maximum debt service your NOI can support at your target ratio, which is a quick way to back into a loan amount that clears policy.
Stop calculating DSCR by hand
LendPipe spreads tax returns and financial statements automatically, then computes property-level and global DSCR against your written credit policy — with the supporting numbers cited.
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