Loan Affordability (DSCR)
Debt Service Coverage Ratio is the number lenders live by. Here's what your business can actually support.
Lenders divide your NOI by your DSCR target to find the annual debt payment your business can support, then back into the loan size at the quoted rate and term. Numbers above use that same math.
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Read the SBA guide →How lenders calculate what you can borrow (DSCR)
Debt service coverage ratio is the single number that decides most small business loan applications. It compares the cash your business generates to the debt payments it must make, and underwriters use it to size the loan long before they discuss rates. If your DSCR falls below the lender's floor, the answer is no regardless of how good the opportunity looks.
The calculator applies the same method a commercial or SBA underwriter uses: it starts with net operating income, adds back non-cash charges to get cash available for debt service, applies the lender's minimum coverage ratio, and works backward to the maximum annual payment — and therefore the maximum loan — your business supports at a given rate and term.
The underwriting math
Cash available for debt service
Net operating income + depreciation + amortization + interest
Underwriters add back non-cash charges, and often normalize excess owner compensation and one-time expenses.
Debt service coverage ratio
Cash available ÷ Annual debt service
Most conventional lenders want 1.25x or better. SBA 7(a) underwriting commonly looks for 1.15x to 1.25x.
Maximum supportable payment
Cash available ÷ Required DSCR
Amortize that payment at the quoted rate and term and you have your realistic loan ceiling.
How to read your result
1.25x is the common floor, not the goal
A DSCR of exactly 1.25 leaves 25 cents of cushion per dollar of payment. Underwriters stress-test that cushion against a revenue decline, so applications that clear the floor by a wide margin move faster and price better.
Existing debt counts against you
Global debt service includes every current obligation — equipment notes, vehicle loans, credit lines, and often the owner's personal mortgage on an SBA deal. Consolidating or retiring a small note before applying can free up meaningful borrowing capacity.
Clean books raise the number you qualify for
Personal expenses run through the business, missing add-backs, and unreconciled accounts all understate cash available for debt service. We routinely see qualifying capacity move once the add-backs are documented properly.
Frequently asked questions
+What is a good DSCR for a business loan?
1.25x is the standard conventional benchmark, meaning the business generates $1.25 of cash for every $1.00 of debt payments. SBA lenders commonly work in the 1.15x to 1.25x range, and stronger applications land at 1.40x or higher. Below 1.0x the business does not cover its debt from operations.
+How do you calculate DSCR?
Divide net operating income (adjusted for non-cash items like depreciation and amortization, plus interest) by total annual debt service, which is principal plus interest on all obligations. A business with $120,000 of cash available and $80,000 of annual payments has a DSCR of 1.5x.
+What add-backs will a lender accept?
Depreciation, amortization, interest on debt being refinanced, one-time non-recurring expenses, and excess owner compensation above a market wage. Each one must be documented and traceable in the books — an add-back an underwriter cannot verify is an add-back they will not allow.
+Does personal debt affect a business loan?
On SBA and most small business loans, yes. Underwriters run global cash flow, combining business and personal obligations against combined income, because the owner personally guarantees the loan.
+What if my DSCR is too low?
You have four levers: increase net operating income, retire or restructure existing debt, extend the term of the new loan to lower the annual payment, or reduce the loan amount. Improving margin over two or three clean quarters is the option lenders respect most.
Preparing a loan or SBA application?
Underwriters price the risk they can see. We reconcile the books, separate personal from business activity, document your add-backs, and produce the financial package — P&L, balance sheet, and cash flow — that lenders expect to receive.
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This calculator is only as accurate as the books behind it. Here's where to go next.
- SBA loan bookkeeping guideExactly what underwriters ask for, and how to have it ready.Open SBA loan bookkeeping guide
- Loan-ready financial packagesReconciled statements, clean owner comp, and YoY comparability.Open Loan-ready financial packages
- Industries we serveUnderwriting expectations differ by industry — see yours.Open Industries we serve