Free lender tool
DSCR calculator for business loans
Last updated · Kaaj editorial team
DSCR (debt service coverage ratio) is the cash a business has available to pay debt divided by the debt it must pay. A DSCR of 1.25x means the business earns $1.25 for every $1.00 of annual principal and interest. Enter the borrower's net income, add-backs, and debt below to calculate DSCR with the proposed payment, switch to global DSCR to include a guarantor, and see the largest loan the cash flow supports at your minimum.
Debt service coverage ratio
1.72x
Meets the 1.25x minimum
DSCR = (net income + depreciation and amortization + interest + add-backs) ÷ (existing annual debt service + new payment × 12).
DSCR formula
The calculator applies these formulas. Where your credit policy defines cash flow or debt service differently, use your policy's version.
Business DSCR
(Net income + depreciation and amortization + interest + add-backs) ÷ annual debt service
The standard commercial and equipment lending version. The numerator is close to EBITDA; interest is added back because it is paid out of the debt service being measured.
Annual debt service
Existing principal and interest that stays + (new monthly payment × 12)
Remove debt being paid off at closing. Annualize daily or weekly MCA and loan debits found in bank statements.
Global DSCR
(Business cash flow + guarantor income − living expenses) ÷ (business debt service + personal debt service)
Used when guarantors or related entities support the loan. Count distributions once, either in business cash flow or in the guarantor's income, never both.
Monthly payment from loan terms
Loan amount × r ÷ (1 − (1 + r)^−n), where r is the monthly rate and n the term in months
The calculator uses this to turn a loan request into the payment that enters debt service, and runs it backwards to find the largest supportable loan.
What is a good DSCR?
Higher is safer. Most business lenders want at least 1.20x to 1.25x; the SBA sets the floor for 7(a) loans.
| DSCR | What it means | How lenders treat it |
|---|---|---|
| Below 1.00x | Cash flow does not cover debt payments. The business would need outside cash to stay current. | Usually a decline or a restructure unless strong collateral or a guarantor closes the gap. |
| 1.00x to 1.15x | Cash flow just covers debt with little room for a bad month. | SBA 7(a) loans of $350,000 or less require at least 1.0x; many conventional lenders treat this range as an exception. |
| 1.15x to 1.25x | Modest cushion above debt service. | SBA 7(a) loans over $350,000 require at least 1.15x. Some equipment and commercial programs accept this range with compensating factors. |
| 1.25x and above | Comfortable cushion; cash flow could fall by about a fifth and still cover payments. | A common minimum for conventional commercial and equipment loans; many credit policies set 1.20x to 1.35x. |
Worked example
The calculator's default values: a business requesting a $150,000 equipment loan at 9.5% for 60 months.
| Net income | $180,000 |
|---|---|
| + Depreciation and amortization | $95,000 |
| + Interest expense | $22,000 |
| + Add-backs | $8,000 |
| = Cash available for debt service | $305,000 |
| Existing annual debt service | $140,000 |
| + New payment ($3,150 × 12) | $37,803 |
| = Total annual debt service | $177,803 |
| DSCR ($305,000 ÷ $177,803) | 1.72x |
| Largest supportable loan at 1.25x, same rate and term | About $412,700 |
DSCR vs. global DSCR vs. FCCR
| Measure | Question it answers | Where it is used |
|---|---|---|
| DSCR | Can operating cash flow pay all principal and interest? | Business loans, equipment finance, SBA, commercial real estate |
| Global DSCR | Can the business and its guarantors together pay all their debts? | Small business loans with personal guarantees |
| FCCR (fixed charge coverage) | Can cash flow cover debt plus leases, rent, and other fixed charges? | Asset-based and middle-market loan covenants |
| DSCR for rental property | Does rental income (NOI) cover the mortgage payment? | Investor real estate "DSCR loans"; uses rent and PITIA, not business cash flow |
DSCR questions
How do you calculate DSCR?
Divide cash available for debt service by annual debt service. For a business, cash available is usually net income plus depreciation and amortization, interest expense, and policy add-backs. Debt service is the principal and interest on existing debt that stays plus twelve months of the new payment.
What is a good DSCR for a business loan?
1.25x or higher is a common minimum for conventional commercial and equipment loans, and many policies sit between 1.20x and 1.35x. SBA 7(a) loans require at least 1.15x above $350,000 and at least 1.0x at or below $350,000. Your credit policy decides.
What does a DSCR below 1 mean?
The business does not generate enough cash to cover its debt payments. At 0.90x it covers only 90 cents of every dollar due. Lenders usually decline, reduce the loan, extend the term, or rely on a guarantor or collateral to close the gap.
What is global DSCR?
Global DSCR combines the business with its guarantors: business cash flow plus guarantor income minus living expenses, divided by business and personal debt service. It shows whether the borrowing group as a whole can carry the debt.
Should depreciation and interest be added back?
Usually yes. Depreciation and amortization are non-cash expenses, and interest is added back because it is part of the debt service in the denominator. Some policies also add back one-time or excess owner expenses, documented case by case.
Is DSCR the same as FCCR?
No. FCCR (fixed charge coverage ratio) adds rent, lease payments, and other fixed charges to the denominator, so it is usually lower than DSCR for the same business. It is common in asset-based and middle-market covenants.
How do merchant cash advance payments affect DSCR?
Daily or weekly MCA remittances are debt service. Annualize them from the bank statements and add them to the denominator. Undisclosed MCA positions are a common reason a deal's real DSCR is much lower than the application suggests.
Is this the same as a DSCR loan calculator for rental property?
No. Real estate "DSCR loans" divide a property's rental income by its mortgage payment (principal, interest, taxes, insurance, and HOA). This calculator measures a business's cash flow against its debt, the way commercial and equipment lenders underwrite.
Can DSCR be calculated from bank statements?
Yes, for interim or current cash flow. Start from true revenue (deposits minus transfers, loan and MCA proceeds, and refunds), subtract operating expenses, and compare with the debt payments visible in the statements. Many lenders check bank-statement cash flow against the tax returns.
Calculate DSCR from the documents, not by hand
Kaaj calculates DSCR from bank statements, tax returns, and financial statements the way your policy defines it, including the proposed payment and an editable debt schedule, and finds MCA and loan debits the application left out.