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DSCR Calculator

Will your business make enough to pay back a loan? Find out in 30 seconds. Any currency, no sign-up.

Showing example numbers — type over them with yours.

Your business, per year

Costs: rent, salaries, stock, utilities. Leave out loan payments.

The loan

Your loan coverage (DSCR)

1.64

The business makes 1.64 for every 1 it owes in loan payments.

Looks healthy

Banks usually want at least 1.25. You have room to spare.

Monthly payment
3,041
Most you could borrow*
197,274

*At the same rate and term, keeping coverage at 1.25.

Start free. Not a guarantee of approval.

What is DSCR?

DSCR stands for debt service coverage ratio. It is the number banks use to answer one question: will this business make enough money to pay back the loan?

DSCR = yearly profit before loan payments ÷ yearly loan payments

Yearly profit before loan payments is your sales minus your running costs (rent, salaries, stock, utilities). Accountants call this net operating income or EBITDA. Yearly loan payments are everything you pay the bank in a year — the loan itself plus interest (or profit, for Islamic financing).

A DSCR of 1.50 means the business makes 1.50 for every 1 it owes the bank.

Worked example

Sales
180,000
Running costs
− 120,000
Profit before loan payments
60,000
Loan: 150,000 at 8% over 5 years
3,041 / month
Yearly loan payments
36,492
DSCR
60,000 ÷ 36,492 = 1.64

Banks usually want at least 1.25. With 60,000 profit, that allows up to 48,000 a year in loan payments — a loan of roughly 197,000 at the same rate and term.

What DSCR do banks look for?

Every bank sets its own rules, but 1.25 is a common minimum for small business loans.

1.25 or moreWhat most banks look for. You can pay the loan with 25% to spare.
1.00 – 1.25You can just about pay. Banks may ask for more security or a smaller loan.
Under 1.00The business would not make enough to pay the loan. Most banks will say no as it stands.

How to improve a low DSCR

Stretch the term

Paying the same loan over more years means smaller yearly payments — but more interest in total.

Borrow less

Put in more of your own money, or start smaller. The calculator shows the most you could borrow.

Revisit your cost base

Every regular cost you cut adds to your profit. Banks will check the cuts are realistic.

Back your revenue with evidence

Higher sales only help if the bank believes them. Pre-orders, contracts and similar businesses make your case.

Questions about DSCR

Debt service coverage ratio (DSCR) measures how many times your cash available for debt service covers your annual loan payments. It is calculated as cash available for debt service divided by total annual debt service (principal plus interest).

Requirements vary by lender and loan type. 1.25x is a widely used benchmark for small business loans. Between 1.0x and 1.25x is tight and usually reviewed closely; below 1.0x means the business would not generate enough cash to cover the payment on paper.

Divide your annual cash available by 1.25 to get the most you can pay each year at a 1.25x DSCR, subtract any existing loan payments, then work out the loan that payment supports at your rate and term. The calculator above does this for you.

Yes. Lenders look at total debt service — every loan the business pays in the year, not just the new one. Add existing annual payments in the optional field.

Yes. Use the profit rate in place of an interest rate, or enter the total annual installment (principal plus profit) directly. The ratio is calculated the same way.

No — this is a quick, anonymous check. To build a full plan with DSCR for every year of the loan, a repayment schedule and exportable financials, start a free plan on Funderly and upgrade when you're ready.