DSCR calculator: debt service coverage ratio for a business loan
Edited by Moe Ameen · Published
DSCR, the debt service coverage ratio, is net operating income divided by total debt payments for the same period. $150,000 of yearly income against $120,000 of yearly payments gives 1.25. Below 1.0 the business doesn't earn enough to cover its debt. NerdWallet says most lenders want 1.25 or more. The SBA's minimums for 7(a) loans are 1.10 on loans of $350,000 or less and 1.15 above that.
Key takeaways
- DSCR = net operating income ÷ total debt service, for the same period.
- 1.0 means income exactly covers the payments. Lenders want a cushion above that.
- NerdWallet says most lenders want at least 1.25, and Investopedia says 1.2 to 1.25.
- SBA 7(a) minimums since October 1, 2026: 1.10 for small loans and 1.15 for standard loans.
- Debt service includes the new loan's payments, not just your current ones.
How do you calculate the debt service coverage ratio?
Divide net operating income by total debt service for the same period. $150,000 of income over $120,000 of payments is 1.25.
Investopedia gives the formula as DSCR = net operating income ÷ total debt service, where net operating income is revenue minus operating expenses, before taxes and interest [1]. Debt service is the principal and interest you pay on all debt over that period [1][2]. Use annual figures on both sides, or monthly on both sides. Mixing them gives a wrong answer.
What is a good DSCR for a business loan?
There's no single standard. NerdWallet says most lenders want 1.25 or higher, with 1.25 to 1.50 a typical minimum and 2.0 very strong.
NerdWallet puts a typical lender minimum at 1.25 to 1.50 and calls 2.0 very strong [2]. Investopedia says many lenders set minimums of 1.2 to 1.25, and that under 1.0 means negative cash flow: at 0.95, income covers only 95% of the payments [1].
What DSCR does the SBA require for a 7(a) loan?
Under SBA rules effective October 1, 2026: 1.10 for 7(a) loans of $350,000 or less and 1.15 for larger ones, plus 1.0 globally.
| Loan | Minimum DSCR |
|---|---|
| 7(a) Small Loans, $350,000 or less (not a change of ownership) | 1.10 |
| Standard 7(a) loans, over $350,000 | 1.15, and 1.0 on a global basis |
| Change of ownership (buying a business) | Set in the SOP's Appendix 15; ask your lender |
The SBA measures income as operating cash flow, defined as EBITDA, and counts payments on all business debt including the new SBA loan [3]. That can come out different from a simple revenue-minus-expenses figure, so treat the calculator as an estimate.
How do you include a new loan in debt service?
Work out the new loan's payments with the amortization formula and add them to what you already pay. Lenders run DSCR with the new loan included.
The monthly payment is the loan amount × r(1+r)^n ÷ ((1+r)^n − 1), where r is the monthly rate and n the number of payments [4]. A $500,000 loan at 10% over 10 years costs $6,607.54 a month, or $79,290.44 a year. Against $150,000 of net operating income, that's a DSCR of 1.89. Add a second loan of $250,000 at 11% over 5 years ($65,227.27 a year) and it drops to 1.04.
How can a business raise its DSCR?
Raise net operating income or lower debt payments. A longer term or refinancing at a lower rate cuts the yearly payment on the same debt.
NerdWallet suggests renegotiating vendor contracts, cutting expenses, paying down debt and refinancing at a lower rate [2]. You can also work backward: to reach 1.25 on $150,000 of income, yearly debt service has to stay at or under $120,000. To compare terms, try the business loan calculator.
Glisten tool
DSCR calculator
Glisten tool · DSCR calculator
— DSCR
Enter your net operating income, or revenue and operating expenses.
Lenders measure income and debt their own way. The SBA, for example, starts from EBITDA. Treat this as an estimate. It runs in your browser, and nothing you type is sent anywhere or saved.
We checked the calculator against the examples above. $150,000 ÷ $120,000 gives 1.25, NerdWallet's own example of $350,000 ÷ $200,000 gives 1.75 [2], and the $500,000 loan example gives 1.89. Loan payments use the same formula as our business loan calculator.
Is this right for you?
Best for
- Checking whether your income covers a new loan's payments before you apply.
- Seeing how far you are from the SBA's 1.10 or 1.15 minimums, or the 1.25 many lenders look for.
Not ideal for
- Matching a lender's exact figure. Lenders adjust income their own way, and the SBA starts from EBITDA.
- Rental-property DSCR loans for real estate investors. This calculator is built for operating businesses.
Frequently asked questions
What does a DSCR of 1.25 mean?
The business earns $1.25 of net operating income for every $1 of debt payments [1][2].
What is the minimum DSCR for an SBA loan?
1.10 for 7(a) loans of $350,000 or less and 1.15 for larger loans, under SBA rules effective October 1, 2026. Loans to buy a business follow the SOP's change-of-ownership rules [3].
Is a DSCR below 1 bad?
It means income doesn't cover the debt payments, so the gap has to come from somewhere else [1].
Should I use annual or monthly numbers?
Either works as long as income and debt payments cover the same period. The SBA's rules work from fiscal year-end statements [3].
Is the calculator private?
Yes. It runs in your browser, and nothing you type is sent anywhere or saved.
How we know this
On October 29, 2026 we read Investopedia's and NerdWallet's DSCR pages, the debt service coverage sections of the SBA's SOP 50 10 8.1 (effective October 1, 2026), and Investopedia's amortization page. The worked examples are our own arithmetic, and the calculator reproduces them.
- Debt-service coverage ratio (DSCR): how to use and calculate it, Investopedia. Checked October 29, 2026.
- Debt service coverage ratio: what it is and how to calculate, NerdWallet. Checked October 29, 2026.
- SOP 50 10 8.1 technical policy updates (effective October 1, 2026), SBA. Checked October 29, 2026.
- Amortization schedule: definition, formula, and calculation, Investopedia. Checked October 29, 2026.