Debt service coverage ratio and supporting figures
Both income and obligations cover a full year. The numerator is entered according to the income definition used in your review; the tool does not reconstruct EBITDA, property NOI, or lender adjustments.
To estimate installments that may enter the debt-service total, use the Loan Calculator with the fixed loan terms being evaluated.
The formula
Both income and obligations cover a full year. The numerator is entered according to the income definition used in your review; the tool does not reconstruct EBITDA, property NOI, or lender adjustments.
Worked debt service coverage ratio example
Annual income available for debt service of 150,000 divided by 80,000 principal plus 20,000 interest gives DSCR of 1.5×. A 1.25× target needs 125,000 income for the same debt service.
How to use this calculator
- Enter annual income available for debt service, annual required principal payments, annual required interest payments.
- Set target dscr using the stated units or choices.
- Calculate and compare debt service coverage ratio, annual debt service, income after debt service, income required at target dscr.
Choosing inputs for debt service coverage ratio
Choose the numerator appropriate to the lending or operating analysis. Property reviews often use net operating income, while business lenders can define adjusted cash flow differently. Enter the amount available before servicing debt and do not subtract the same interest or principal again before dividing.
Debt service is the required principal and interest for the same annual interval. Include the obligations intended by the review, including proposed borrowing when evaluating a financing scenario. A balloon due during the year may materially change required principal and should not be hidden by using an ordinary monthly installment alone.
Interpreting debt service coverage ratio
A ratio of 1× means entered income equals entered required payments. A higher figure leaves a monetary surplus in this model, while a figure below 1× indicates a shortfall. The target control shows a chosen threshold’s income requirement; it does not impose a universal lender standard or predict loan approval.
Assumptions & limitations
What this calculation assumes
- The entered available income is nonnegative and covers the same year as debt service.
- Principal plus interest is positive and required payments are not omitted.
What to keep in mind
- Lender-specific adjustments, negative operating income, taxes outside the numerator, future changes, and approval criteria are excluded.
Common questions
Should principal be included?
Yes. Debt service includes the required principal repayment as well as interest for the chosen year.
Does meeting the target guarantee a loan?
No. The target is your input; lenders consider their own definitions and other financial factors.
Does this compute available income from sales?
No. Enter an available-income amount prepared under your relevant definition; revenue alone is not necessarily cash available for debt.
Sources & further reading
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