DSCR Calculator
Enter net operating income for the year and the total annual debt service, meaning all loan principal and interest payments. You get the debt service coverage ratio, whether it meets the target you enter, and the largest annual and monthly payment the target would allow. Nothing is sent anywhere.
In one sentence: DSCR is how many times the income a business or property produces covers its loan payments.
Formula: DSCR = net operating income ÷ annual debt service; largest debt service for a target = net operating income ÷ target ratio; monthly = ÷ 12.
What goes into the ratio
Net operating income is revenue minus operating expenses, before interest, loan principal, income tax and non-cash items such as depreciation. For a rental property it is rent less vacancies, management, maintenance, insurance and property tax. For a business it is close to operating profit with depreciation added back. Debt service is the full year of payments on all loans, both the interest and the principal, including any new loan being applied for. A ratio of 1.0 means income exactly covers the payments; above 1.0 there is a cushion, below it the payments are being met from reserves or new borrowing.
Lender targets
Lenders set a minimum DSCR that varies with the type of loan, the asset and the economy; figures around 1.2 to 1.5 are commonly cited, with riskier lending requiring more cover. Enter the target from the lender's own criteria. The calculator then shows the largest annual and monthly payment that target allows, which the business loan calculator can turn into a loan amount at a given rate and term. Headroom is the annual payment you could add before the target is breached; a negative figure is the reduction needed to reach it.
Improving the ratio
DSCR rises when income rises, operating costs fall, or debt service falls. Refinancing to a longer term lowers the annual payment and raises the ratio without changing the business, at the cost of more total interest. Paying down an existing loan, which the extra payment calculator models, has the opposite trade-off. For a property, the rental yield calculator covers the income side.
Frequently asked questions
Can net operating income be negative?
Yes; the ratio is then negative and no debt is supportable at any target. The maximum payment shows as zero.
Is DSCR the same as interest cover?
No. Interest cover divides by interest only; DSCR divides by interest plus principal and is stricter.
Is my data stored?
No. Everything runs in your browser.