DSCR Loan Calculator
Use our free debt service coverage ratio calculator to evaluate a real estate investment opportunity or monitor your business's financial health.
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How to use our DSCR loan calculator
Step 1. Enter the details
The details you’ll provide vary depending on whether you’re trying to finance a real estate investment or secure a small-business loan for some other business purpose.
The two tables below cover both scenarios.
Investment property
You'll need to provide the following details when evaluating rental property opportunities or when gauging your qualification for a DSCR loan.
| Property price | Enter the total or projected cost of the rental property you plan to buy or build. If refinancing an existing property, enter the remaining loan balance instead. |
| Down payment | If you're required to make an upfront payment on the loan, enter it as a percentage of the property price here. |
| Loan term | The number of years until your loan is fully repaid. |
| Interest rate | This is the annual interest rate your lender charges you for the loan. If you're not sure, check out average commercial real estate loan rates for a quick estimate. |
| Property taxes | Enter the actual or estimated property tax you'll have to pay each year. |
| Insurance | Enter the actual or estimated insurance premiums you'll have to pay for the property each year. |
| HOA fees | If the property is part of a homeowners association, enter the actual or estimated amount of HOA fees due each year. |
| Rental income | Enter the monthly rental income you expect to get on the property. |
Something else
Here are the details you’ll need to provide if you’re seeking a loan for another business need, or if you’re curious about the financial stability of your business as it relates to its debt obligations.
| Net operating income | The revenue your business makes after subtracting operating expenses. Operating expenses refer to the cost of running your business and can include payroll, marketing, property taxes and more. |
| Total loan payments | Enter the total amount of all business loan payments you make to lenders every month. |
» MORE: Business loan calculator
2. Calculate your DSCR
Once you hit “calculate,” our tool will generate your DSCR.
Here’s how you can interpret your result:
- DSCR greater than 1. Your cash flow exceeds loan payments, indicating a strong business or real estate investment opportunity.
- DSCR equal to 1. You’re breaking even after covering loan payments.
- DSCR less than 1. Your cash flow isn’t enough to cover loan payments, signaling financial strain in your business or an unfavorable rental property investment.
How much do you need?
We'll start with a brief questionnaire to better understand the unique
needs of your business.
Once we uncover your personalized matches, our team will consult you
on the process moving forward.
What is DSCR?
The debt service coverage ratio (DSCR) measures a business’s ability to meet its current debt obligations.
It compares a business’s net operating income (NOI) to its total loan payments, providing insight into financial stability. A DSCR above one indicates that a business makes more than enough money to cover its current debts, while a DSCR below one may signal financial strain.
For example, if a business’s DSCR is 1.5, that means that it generates $1.50 for every $1.00 it pays back to lenders.
This ratio is a key metric for evaluating the profitability of real estate investments. In this case, it compares the property’s gross rental income to its mortgage payment, which includes principal, interest, property taxes, insurance and HOA fees. The higher the DSCR, the more profitable a rental property may be.
Similarly, if the DSCR on a rental property is 1.5, that means you’re getting $1.50 in revenue for every $1.00 you pay on the loan, or mortgage.
Who uses DSCR?
- Lenders use DSCR to determine a potential borrower’s eligibility for a small-business loan or DSCR loan.
- Small-business owners use it to assess a property's profitability, determine their eligibility for a small-business loan and monitor their business’s financial health.
What DSCR do you need to qualify for a loan?
Many business lenders prefer a DSCR of 1.25 or higher to consider you for a loan. For rental real estate investments, lenders will look at the DSCR for the property in question. For other types of business loans, lenders will consider your DSCR across all your loans.
A higher DSCR indicates stronger financial health and increases the likelihood you’ll be approved for a loan or unlock better loan terms.
» MORE: Business loan requirements
How can I improve my DSCR?
To improve your DSCR for a rental property, consider increasing rent, finding lower home insurance rates, negotiating better mortgage terms, refinancing an existing loan or making a larger down payment.
For small-business loans, entrepreneurs can improve their DSCR by increasing revenue, reducing operational expenses and lowering debt obligations by paying off existing debt sooner.
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