Debt Service Coverage Ratio (DSCR) and Interest Coverage Calculator
How many times a business or property covers its loan payments: the DSCR, the interest coverage ratio and debt ÷ EBITDA, with the margin left before payments become a struggle.
Results
What this tool does
A DSCR of 1.00 means income exactly covers interest plus principal; below it the borrower must find cash elsewhere. Lenders usually want a cushion above 1 — figures around 1.2 to 1.5 are commonly quoted for commercial loans — and the last result shows how much the cash flow could fall before that cushion is gone. Interest coverage looks only at interest, so it flatters a business with large principal repayments; the DSCR, which counts both, is the stricter test. Exact definitions of ‘cash available’ vary between lenders, so check their covenant wording.
Formula
DSCR = cash available for debt service ÷ (interest + principal) · interest coverage = EBIT ÷ interest · leverage = debt ÷ EBITDA
Variables
| Symbol | Meaning | Unit |
|---|---|---|
noi | Cash available for debt service (net operating income) | — |
ie | Interest expense for the year | — |
pr | Loan principal repaid in the year | — |
eb | Operating profit (EBIT) | — |
eda | EBITDA | — |
td | Total debt | — |
D | Debt service coverage ratio (DSCR) | — |
DS | Debt service (interest + principal) | — |
IC | Interest coverage ratio (EBIT ÷ interest) | — |
LV | Total debt ÷ EBITDA (years of EBITDA to repay) | — |
CU | Fall in that cash flow before DSCR hits 1 | % |
Worked example
- Cash available for debt service (net operating income)180,000
- Interest expense for the year60,000
- Loan principal repaid in the year90,000
- Operating profit (EBIT)150,000
- EBITDA210,000
- Total debt1,000,000
- Debt service coverage ratio (DSCR)1.20
- Debt service (interest + principal)150,000
- Interest coverage ratio (EBIT ÷ interest)2.50
- Total debt ÷ EBITDA (years of EBITDA to repay)4.76
- Fall in that cash flow before DSCR hits 116.7 %
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- For work that must comply with a standard or be signed off, check the result against the applicable code and have it reviewed by a qualified engineer.