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Debt Service Coverage Ratio (DSCR) Calculator

Calculate a property or business's debt service coverage ratio, DSCR = net operating income ÷ annual debt service, the metric lenders use to judge whether income alone covers loan payments.

Debt service coverage ratio (DSCR)
1.35x
Cushion above break-even (DSCR = 1.0)
35%
Annual surplus over debt service
$35,000/yr

Where this falls

1.4 falls in the "Comfortable cushion (1.25-1.5)" range.

How it works

Debt service coverage ratio is the figure commercial lenders use to judge whether a property's or business's own income can support its loan payments, independent of the borrower's other resources: DSCR = net operating income ÷ annual debt service. A DSCR of exactly 1.0 means income exactly covers the loan payments with nothing left over; above 1.0 there's a cushion, below 1.0 the income alone falls short of covering the debt.

This is distinct from this site's existing Rental Cap Rate calculator's cash-on-cash return, which divides cash flow by the cash an equity investor put in — an equity-side return. DSCR instead divides income directly by debt service with no reference to how much cash was invested, which is what a lender with no equity stake actually cares about. The cushion or shortfall is also reported as a percentage above or below that 1.0 break-even, and as a plain dollar surplus or shortfall per year.

FAQ

What DSCR do lenders typically want to see?

It varies by lender, loan type, and property class, but many commercial and investment-property lenders look for a DSCR of at least 1.25 — enough cushion that a dip in income still leaves the loan fully covered. This calculator reports the exact ratio and cushion so you can compare it against whatever minimum a specific lender requires, rather than assuming one threshold applies everywhere.

Can net operating income be negative, and what does that mean here?

Yes — if operating expenses exceed income, NOI is negative, and the DSCR comes out negative too, meaning the property or business isn't just falling short of covering its debt service, its core operations are losing money before the loan payment is even considered. That's a more serious situation than a DSCR between 0 and 1, where operations are at least profitable but not quite enough to cover the debt.

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