Free lender math

DSCR Calculator: see the ratio your lender will calculate

Debt service coverage ratio is the first number an underwriter runs. Enter your income and debt payments below and the result updates instantly — no email required. Then send us the inputs and we'll tell you whether your books will actually support them.

Bank standard: 1.25x minimum Reviewed by a 40-year commercial banker No signup, instant results

Your numbers

Annual net operating incomeNet income plus interest, depreciation, amortization, and documented add-backs.Existing annual debt serviceTwelve months of principal and interest on current notes, lines, and leases.New loan amountLeave at 0 to score only your existing debt.Interest rate (%)Use the rate you've been quoted.Term (years)SBA 7(a) working capital is often 10 years; real estate 25.

Your DSCR

2.43x

Strong

This clears typical bank and SBA thresholds with room to spare. Expect underwriting to focus on documentation quality rather than capacity.

New loan payment: $3,167/mo
New loan annual debt service: $38,003
Total annual debt service: $74,003
DSCR on existing debt only: 5.00x
Debt service supportable at 1.25x: $144,000
Headroom vs. 1.25x: $69,997

Send these numbers to a banker

Your inputs travel with you to the contact form — nothing is submitted until you press send. Prefer to talk? (281) 301-1550

What DSCR is, and why it decides your loan

Debt service coverage ratio answers one question a credit committee cannot skip: does this business produce enough cash to make the payments? The formula is simple — net operating income ÷ annual debt service — but the inputs are where applications succeed or die. Underwriters rebuild both sides from your tax returns, your year-to-date statements, and your debt schedule. If those three don't agree, the ratio you calculated at home is not the ratio in the credit memo.

The income side

Start with net income, then add back interest, depreciation, and amortization. Owner compensation above market, one-time legal costs, and non-recurring equipment expense can be added back too — but only when the books document them clearly enough for a lender to accept.

The debt side

Twelve months of principal and interest on every obligation: term notes, lines of credit drawn, equipment leases, SBA loans, and the proposed new payment. Cards and seller notes count. Debt omitted from your schedule and found in the returns costs you credibility.

The thresholds

1.25x is the working standard for bank and SBA 7(a) credit. Commercial real estate runs 1.20x to 1.35x by property type. Contractors and other cyclical borrowers are often held to 1.35x or higher because revenue is lumpy.

What moves the number

Refinancing a five-year note to ten years cuts annual debt service sharply. Retiring a high-payment line helps immediately. So does correcting misclassified expenses that understate real profit — a common finding in books that were never reconciled.

A ratio above 1.25x only helps if the statements behind it hold up. That is what our loan-ready financials service in Houston produces: lender-format P&L and balance sheet, a complete debt schedule, and a DSCR calculation documented the way a credit memo shows it. If the history has to be rebuilt first, start with catch-up bookkeeping and QuickBooks cleanup, then read the SBA loan bookkeeping guide for the full document list. Want maximum loan size instead of a ratio? Use the loan affordability calculator.

Free review

Have a banker check your DSCR before you apply

We'll recalculate it from your actual books, flag what an underwriter would question, and quote a flat fee if cleanup is needed — usually within one business day.

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DSCR questions we get from Houston borrowers

What is DSCR?

Debt service coverage ratio (DSCR) is your net operating income divided by your total annual debt payments — principal plus interest. A DSCR of 1.25x means the business generates $1.25 of income for every $1.00 of debt service, leaving a 25% cushion.

What DSCR do lenders require?

Most Houston banks and SBA 7(a) lenders underwrite to a minimum of 1.25x. Commercial real estate often needs 1.20x to 1.35x depending on property type, and asset-heavy or cyclical borrowers such as contractors are frequently held to 1.35x or higher.

How is DSCR calculated?

DSCR = net operating income ÷ annual debt service. Net operating income is typically net income plus interest, depreciation, amortization, and documented one-time or owner add-backs. Annual debt service is twelve months of principal and interest on existing debt plus the proposed new loan.

What is a good DSCR?

Above 1.25x is generally approvable, 1.50x and above is strong, 1.00x to 1.24x is tight and usually requires more collateral or a guarantor, and below 1.00x means the business does not currently cover its debt payments.

Can I improve my DSCR before applying?

Yes. Documenting legitimate add-backs, refinancing short-amortization debt into longer terms, retiring high-payment credit lines, and cleaning up misclassified expenses that overstate costs all move the ratio. Clean books are what let a lender accept those adjustments.

Serving Greater Houston, TX

Turn your DSCR into an approvable loan package

Send your QuickBooks file or last three bank statements. We'll recalculate coverage from the real numbers, list what an underwriter would flag, and quote a flat fee to get the package built.

Get my free file review (281) 301-1550

Prefer email? Use the contact form and we'll follow up with a written scope and price.

DSCR computed the way the credit memo shows it
Lender-format statements and a complete debt schedule
Reviewed by a banker with 40+ years of commercial lending experience
Flat fee quoted up front — no hourly meter

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