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Business loan DSCR calculator
Your debt service coverage ratio, or DSCR, is the first number a lender works out. Enter the lines from your tax return and your loan payments, add the owner if you like, and see your ratio and the largest loan your cash flow supports.
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- Nothing you type is sent anywhere
- The full check's own math
1.31x means the business and its owner bring in $1.31 for every $1.00 of loan payments. SBA loans like this one need at least 1.15x, and conventional loans usually 1.25x.
DSCR calculator
What's your debt service coverage ratio?
It starts with the made-up bakery's numbers from the worked example. Replace them with yours. Everything is worked out in your browser.
Global debt coverage, with the owner
DSCR 1.31x. Your cash flow covers the payments with room to spare. SBA lenders look for 1.15x or better.
- Cash flow
- $184,630 a yearThe business's $154,600, and $30,030 from the owner after tax and $34,270 of living expenses
- Loan payments
- $141,187 a year$44,160 now, $34,440 personal, $62,587 for the new loan
- New loan payment
- $5,216 a month6.96%, 10 years
- The business alone
- 1.45xits cash flow against its own payments
- Cash flow supports up to
- $585,000at 1.15x, on the same terms
An estimate, not a bank-ready answer. It's one year, as you entered it. A lender reads your returns, works out both years, adds every owner, tests a bad year and higher rates, and counts closing costs and the cash you'd have left, and so does the full check. Run it before you apply to see whether you're ready.
Run the full checkWhat is a debt service coverage ratio?
Cash flow divided by loan payments.
DSCR compares the cash a business brings in over a year with what it has to pay on its loans that year. At 1.00x the cash just covers the payments. Below 1.00x it falls short. Lenders want a cushion above 1.00x, because a slow year shouldn't mean a missed payment.
What counts as cash flow
Start with the business's net income from its tax return. Add back interest, because the loan payments already include it, and depreciation and amortization, which are expenses on the return but don't use cash. That's close to what accountants call EBITDA.
What counts as loan payments
A full year of principal and interest on every loan the business will have: the ones it pays now, its equipment leases and lines of credit, and the new loan. Leave out any loan the new one pays off.
Business DSCR and global DSCR
Owners of 20% or more usually guarantee the loan, so most lenders don't stop at the business. Global DSCR adds each owner's salary and other income, takes off their income tax and an allowance for living costs, and adds their mortgage, car loans and other personal payments. That combined number is usually the one the decision turns on, and it's the one the full check grades.
What DSCR do lenders want?
At least 1.25x for a conventional loan, 1.15x for SBA, and two good years.
For a conventional loan, many banks look for a global DSCR of 1.25x or more in the latest year and the year before. Each lender sets its own number, so some ask for more.
SBA's minimum is lower: SBA 7(a) and 504 loans need coverage of at least 1.15x. For 7(a) loans of $350,000 or less, SBA set it at 1.10x from March 1, 2026, on past or projected cash flow (SBA Procedural Notice 5000-876777). These are floors, and an SBA lender's own policy may ask for more.
Buying a business is the exception. Since October 1, 2026, a 7(a) loan that buys a business or a co-owner's share needs at least 1.25x, measured on past results, not projections (SBA SOP 50 10 8.1). A business that has had the same owners for 2 years or more, buying another in the same line of work, stays at 1.15x.
The full check holds SBA loans to 1.15x, a 7(a) that buys a business or a co-owner's share to 1.25x, and other loans to 1.25x, in both years. If you ask for an SBA loan and a conventional loan together, it works out one overall DSCR with both loans counted, and tests it against each loan's own minimum.
Lenders also set money aside each year for maintenance and repairs, called MCAPEX, estimated from depreciation. The full check tests your coverage after that too.
DSCR worked example
A bakery's DSCR, step by step.
Example Bakery Inc. is made up. It's the business in our sample report, asking for a $450,000 SBA 7(a) loan, and owned entirely by Pat Example. Here's its 2025 coverage, from its tax returns and its list of loans.
Add up the business's cash flow
From the bakery's 2025 business tax return.
- Net income
- $101,900
- Plus interestThe loan payments in step 2 already include it.
- $14,200
- Plus depreciationAn expense on the return, but no cash went out.
- $38,500
- Business cash flow
- $154,600
Add up the business's loan payments, old and new
The new loan is $450,000 plus $14,125 of closing costs added to it, so $464,125, repaid over 10 years at 6.10%: the 10-year Treasury plus 2 points on October 16, 2026.
- Equipment lender$2,900 a month
- $34,800
- Delivery van loan$780 a month
- $9,360
- New SBA 7(a) loan$5,176 a month
- $62,113
- Business loan payments
- $106,273
Business DSCR: $154,600 ÷ $106,273 = 1.45x
Add the owner
Pat Example owns all of the bakery and would guarantee the loan, so the lender adds Pat's side, from the personal tax return and personal financial statement.
- Salary from the bakeryAn expense on the business's return, but it's the owner's income.
- $90,000
- Plus interest and dividends
- $1,800
- Less income tax
- -$27,500
- Less living expenses25% of the first $100,000 of the owner's $161,800 of income, 15% of the rest. That income counts the $70,000 the owner took out as distributions, as cautious lenders do.
- -$34,270
- Owner's cash flow
- $30,030
The $70,000 of distributions isn't added as income: it came out of the business cash flow already counted in step 1. The owner's own loans go on the payments side.
- Car loan$520 a month
- $6,240
- Home mortgage$2,350 a month
- $28,200
- Owner's loan payments
- $34,440
Divide
- Cash flow$154,600 from the business and $30,030 from the owner
- $184,630
- Loan payments$106,273 for the business and $34,440 for the owner
- $140,713
Global DSCR: $184,630 ÷ $140,713 = 1.31x, above SBA's 1.15x minimum.
Check the year before
The same steps for 2024 give $166,375 ÷ $140,713 = 1.18x. That clears SBA's 1.15x minimum too, so the bakery has the two good years lenders want. It would fall short of the 1.25x a conventional loan usually needs.
The bakery is still graded Close. After setting aside $39,850 a year for maintenance and repairs (MCAPEX), its 2025 coverage is 1.03x, under SBA's 1.15x minimum, and a lender will have questions about its balance sheet.
Find the largest loan the cash flow supports
At SBA's 1.15x minimum, $184,630 of cash flow covers up to $160,548 of payments a year. Take off the $78,600 the bakery and its owner already pay, and $81,948 is left for the new loan: enough for about $612,337 over 10 years at 6.10%.
The calculator above starts from these numbers, but prices the loan from today's rates and leaves out closing costs, so its answer can differ a little. The sample report shows the bakery's full results.
How to improve your DSCR
Raise the cash flow, or lower the payments.
- Ask for a smaller amount, or a longer term. Real estate is often repaid over 20 or 25 years, which lowers each payment.
- Put more money down on a purchase, so you borrow less.
- Pay off or refinance a loan with a large payment. If the new loan pays one off, it comes out of your payments.
- Explain a one-time cost in a weak year, like a big repair or a legal bill. With records to show it won't recur, some lenders add it back.
- If this year is stronger than your last tax return, a year-to-date profit and loss statement can show it.
Turned down for not enough cash flow?
Find out what the lender's reason usually means, and what to fix before you apply again.
Get both years, every owner and a bad-year test.
The full check reads your returns and works out your DSCR the way a lender will, with what to fix first.
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