Calculate your Debt Service Coverage Ratio instantly. Most SBA lenders require 1.25x — find out where you stand before you apply.
Debt Service Coverage Ratio tells lenders whether your income can cover your loan payments. Most SBA lenders require 1.25x or higher.
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Debt Service Coverage Ratio is one of the most critical metrics in commercial lending. It determines whether a business generates enough income to comfortably cover its debt payments — and whether a lender will approve your deal.
Most SBA lenders require a minimum 1.25x DSCR. Some will consider 1.15x–1.20x with compensating factors like strong personal credit, a large down payment, or significant collateral. A 1.50x+ DSCR is considered strong and typically gets the best terms.
It depends on the loan purpose. For business acquisitions, DSCR is calculated on the target business's NOI. For commercial real estate loans, it's the property's NOI. For owner-occupied real estate used in the business, lenders often blend both.
Options include: putting more money down to reduce the loan amount, negotiating a longer term to lower annual debt service, asking the seller to carry back a portion on standby, or addressing operational issues suppressing NOI. Strong compensating factors can sometimes get you over the line below 1.25x.
Lenders primarily use 2–3 years of historical NOI from tax returns. Projections are generally not accepted alone. However, a clear growth trajectory backed by contracts or verifiable trends may be considered as a supplement to strong historical performance.
A higher DSCR signals lower risk, which can translate to better pricing. A 1.50x+ DSCR often qualifies for the best available rates. A borderline 1.20x–1.25x may result in a higher rate or additional loan conditions.