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Debt Service Coverage Ratio (DSCR)

The Debt Service Coverage Ratio (DSCR) measures a borrower's ability to cover debt payments from operating cash flow. It is commonly applied to real estate loans (using Net Operating Income) and to corporate lending (using EBITDA with permitted adjustments).

This calculator supports three modes: a real estate NOI-based calculation, a corporate EBITDA-based calculation with adjustments, and a custom numerator/denominator mode for nonstandard lender definitions or pro forma scenarios. Use the method selector to match your lender's definition.

Updated Nov 27, 2025

Uses annual Net Operating Income (NOI) as the numerator and total annual debt service (principal + interest) as the denominator.

Inputs

Advanced inputs

Real estate inputs

Corporate inputs

Custom inputs

Results

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Debt Service Coverage Ratio (DSCR)

1.25

OutputValueUnit
Debt Service Coverage Ratio (DSCR)1.25—
Primary result1.25

Visualization

Methodology

DSCR is calculated as a coverage ratio: numerator divided by denominator. For real estate the numerator is annual Net Operating Income (NOI) and the denominator is total annual debt service (principal plus interest). For corporate borrowers the numerator is adjusted EBITDA per the loan agreement and the denominator is annual debt service.

This tool performs straightforward arithmetic based on your inputs. It does not fetch or validate accounting records. Ensure the inputs match the definition used by your lender or financial model. Maintain auditability by documenting the source and period for each input.

Accuracy and data handling recommendations follow best practices for financial calculation tools. Use version control for input assumptions and preserve supporting schedules. For software quality and secure data handling, consider relevant standards such as ISO quality frameworks, IEEE software engineering practices, and NIST guidance for data integrity and controls.

Worked examples

Example 1 (real estate): NOI = 120,000; annual debt service = 90,000. DSCR = 120,000 ÷ 90,000 = 1.33.

Example 2 (corporate): EBITDA = 500,000; add-backs = 30,000; annual debt service = 400,000. DSCR = (500,000 + 30,000) ÷ 400,000 = 1.325.

Example 3 (custom): custom numerator = 200,000; custom denominator = 250,000. Coverage ratio = 0.80.

Further resources

Expert Q&A

What DSCR value do lenders typically require?

Minimum DSCR requirements vary by lender, asset class, and loan terms. For many commercial real estate loans a DSCR of 1.20 to 1.35 or higher is commonly required, while some lenders require higher minimums for riskier assets. Corporate covenants also vary. Confirm the lender's required DSCR in the loan documentation.

Is DSCR the same as debt-to-income or loan-to-value?

No. DSCR measures coverage (cash flow relative to debt payments). Debt-to-income and loan-to-value measure leverage and collateral relative to income or asset value; they answer different underwriting questions.

How should I treat one-time income or expenses when calculating DSCR?

One-time items are treated according to the lender's policy. In corporate contexts, lenders may allow 'add-backs' to EBITDA for approved non-recurring expenses. For property-level calculations, consistent treatment across periods is essential. Document any adjustments and their rationale.

What are common limitations of this calculator?

This calculator uses user-provided inputs and simple arithmetic. It does not substitute for audited statements, lender audits, or amortization schedules. It does not model timing mismatches, interest rate variability, tax effects, or covenant triggers. Use it for indicative analysis and verify with detailed schedules when making decisions.

How should I interpret a DSCR below 1.0?

A DSCR below 1.0 indicates that operating cash flow is insufficient to cover annual debt service and the borrower would need additional cash sources to meet payments. Lenders typically view DSCRs below 1.0 as high risk, unless covered by other credit mitigants.

Sources & citations