DSCR Calculator
The Debt Service Coverage Ratio (DSCR) measures whether a business or property generates enough income to service its debt. Lenders use it to assess loan risk — a DSCR above 1.25 is generally considered safe, while below 1.0 means income does not cover debt repayments.
How it's calculated
DSCR = Net Operating Income ÷ Total Annual Debt Service
where Net Operating Income = Revenue − Operating expenses (before interest and tax).
Frequently Asked Questions
- What is a good DSCR?
- A DSCR above 1.25 is generally considered safe by commercial lenders — it means income exceeds debt service by 25%. Between 1.0 and 1.25 is considered tight, as there is little buffer. Below 1.0 means the entity cannot cover its debt from operating income alone.
- What counts as total debt service?
- Total debt service is all principal and interest payments due within a year, including business loans, commercial mortgages, hire purchase, and any other debt obligations with scheduled repayments.
- What is net operating income (NOI)?
- NOI is revenue minus all operating expenses, but before deducting interest, tax, depreciation, and amortisation (similar to EBIT). For property, it is rental income minus maintenance, insurance, management fees, and void periods.