Debt Service Coverage Ratio (DSCR) Calculator
Calculate the Debt Service Coverage Ratio (DSCR) from net operating income and total annual debt service to check lending eligibility.
$
$
Total annual loan payments (principal + interest)
Result
DSCR
1.36x
Status
Healthy
How the DSCR Calculator Works
The Debt Service Coverage Ratio (DSCR) measures whether a business or property generates enough income to cover its debt payments. Enter the net operating income (NOI) and the total annual debt service (all principal and interest payments due over the year), and this calculator divides one by the other.
Lenders commonly look for a minimum DSCR around 1.25x, meaning income covers debt payments with a 25% cushion — though the exact minimum varies by lender, loan type, and industry. A DSCR below 1.0 means income isn't enough to cover debt payments at all.
Example
With a net operating income of $150,000 and total annual debt service of $110,000, DSCR = 150,000 ÷ 110,000 ≈ 1.36x — comfortably above the common 1.25x lender minimum.
Common Use Cases
- Checking whether a rental property or business qualifies for a commercial loan.
- Preparing financial documentation ahead of a lender's underwriting review.
- Monitoring an existing loan's DSCR covenant to avoid a technical default.
- Comparing the debt coverage strength of different investment properties or deals.
FAQs
What DSCR do lenders typically require?
Many commercial and DSCR-loan lenders look for a minimum around 1.25x, though requirements range from roughly 1.0x to 1.5x or higher depending on the lender, property type, loan program, and perceived risk of the deal.
What does a DSCR below 1.0 mean?
A DSCR below 1.0 means net operating income isn't sufficient to cover the debt payments on its own, which would require drawing on cash reserves or other income sources to stay current — a red flag for most lenders.
How do I calculate net operating income?
NOI is typically total revenue minus operating expenses, excluding debt payments, income taxes, depreciation, and capital expenditures. For a rental property, that's rental income minus expenses like maintenance, insurance, property management, and property taxes.