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?
- Commercial lenders generally treat anything above 1.25 as safe — income exceeds debt payments by at least 25%. Between 1.0 and 1.25 is tight, with very little buffer if trading dips. Below 1.0 the business cannot cover its debt from operating income at all, which lenders read as a serious warning rather than a borderline case.
- What counts as total debt service?
- Total debt service is every principal and interest payment falling due within the year. Include business loans, commercial mortgages, hire purchase agreements and any other debt with scheduled repayments. Include the proposed new borrowing too. Leaving it out is the most common way to produce a DSCR that looks healthy and then fails the lender's own calculation.
- What is net operating income (NOI)?
- Net operating income is revenue minus operating expenses, taken before interest, tax, depreciation and amortisation — broadly the same as EBIT. For property specifically, it is rental income minus maintenance, insurance, management fees and an allowance for void periods. Do not forget the voids. Assuming full occupancy is the quickest way to overstate NOI and the DSCR built on it.