Lenders commonly require 1.20–1.25 or higher; above 2 is very strong.

What does a DSCR below 1 mean?

Income does not cover the loan payments, so the shortfall must come from other sources.

Is DSCR the same as interest coverage?

No. Interest coverage uses interest only; DSCR includes principal repayments.

Debt Service Coverage Ratio (DSCR)

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Debt Service Coverage Ratio (DSCR) Calculator

The debt service coverage ratio compares the income available to pay debts with the total debt payments due over the same period, principal and interest together. It is the main test lenders apply to commercial property loans, business loans and project finance, because it answers the question that matters to them: can the borrower’s income actually make the loan payments?

Formula

DSCR = Net operating incomeTotal debt service

Where

Net operating income: income after operating expenses, before debt payments (for property: rent minus operating costs)
Total debt service: all principal and interest payments due in the same period

Calculator

Net operating income

Total debt service (principal + interest)

Result and step-by-step solution

DSCR

1.5×

Income covers debt payments with 50,000.00 to spare. Many lenders look for at least 1.20–1.25×.

Divide
150,000.00100,000.00 = 1.5

How to use the formula

For a rental property, net operating income is rent and other income minus operating expenses such as maintenance, insurance, management and property tax, before any loan payments and before income tax. For a business, lenders usually start from EBITDA, sometimes adjusted for taxes and capital spending. Debt service is the sum of all scheduled loan payments.

With net operating income of 150,000 and annual debt service of 100,000, the DSCR is 1.5: income covers the payments one and a half times, with 50,000 to spare. Many lenders require at least 1.20 to 1.25 for property loans. A DSCR below 1 means the borrower must find cash elsewhere. Unlike interest coverage, DSCR includes principal. To estimate the payment itself, use the loan payment formula; for property returns, see the site’s cash-on-cash return calculator.

Frequently asked questions

What is the DSCR formula?: DSCR = net operating income ÷ total debt service (principal + interest) for the same period.
What is a good DSCR?: Lenders commonly require 1.20–1.25 or higher; above 2 is very strong.
What does a DSCR below 1 mean?: Income does not cover the loan payments, so the shortfall must come from other sources.
Is DSCR the same as interest coverage?: No. Interest coverage uses interest only; DSCR includes principal repayments.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.