DSCR Calculator
Whether a business earns enough to cover the debt a lender will ask it to carry — and the largest loan that still clears the coverage they require.
The address carries whatever you changed, so anyone opening it sees these numbers. Nothing is saved on our side.
Debt service coverage
2.02×
Earnings cover the debt 2.02× over, against the 1.25× required, and leave $155,157 a year after every payment.
- $307,000
- Earnings less your salary
- $12,654
- $151,843
- $155,157
- $1,455,713
- At 1.25× coverage
- Meets it
The arithmetic, line by line
Coverage is one division, but which numbers go into it decides everything.
- Annual earnings
- $392,000
- Less: your salary
- −$85,000
- Available to service debt
- $307,000
- Annual debt service
- $151,843
- Coverage
- 2.02×
A coverage ratio of exactly 1.00 means the business earns precisely what it owes and nothing more. Lenders require a margin above that because a business that clears its debt only in a perfect year is a business that misses payments in an ordinary one.
How this calculator works
One division, and one solve.
available = earnings − your salary
DSCR = available ÷ annual debt service
The largest supportable loan is solved directly rather than searched for: the affordable annual service is available earnings divided by the required ratio, which gives the affordable monthly payment, which the present-value formula turns back into a loan amount.
With no debt entered the ratio is reported as absent rather than as infinity — earnings divided by nothing is not a coverage ratio.
What is assumed
- Earnings hold up. A ratio computed on last year’s best quarter annualized is not a ratio.
- A fixed rate. A variable rate moves the ratio after closing.
- No capital expenditure. If the business needs equipment replaced, that cash competes with the debt.
A worked example
$392,000 of earnings, an $85,000 salary, a $900,000 loan at 11.5% over ten years.
| Annual earnings | SDE |
|---|---|
| Less: your salary | What you take out to live |
| Available to service debt | 392,000 − 85,000 |
| Monthly payment | $900,000 at 11.5% over 10 years |
| Annual debt service | 12,653.59 × 12 |
| Coverage | 307,000 ÷ 151,843 — comfortably past 1.25× |
At 1.25× required, this business could actually carry a loan of roughly $1.46 million rather than $900,000. That headroom is worth knowing before negotiating: it is the difference between being at the edge of what a lender will do and having room to move on price.
Questions people ask
That the business earns $1.25 for every $1.00 of debt payment it owes. The 25 cents is the margin — the room for a bad quarter, a lost customer or a rate change before payments start being missed.
Because 1.00 means the business earns exactly what it owes and nothing more. Any variance at all — one slow month, one repair, one customer paying late — is a missed payment. A business that only clears its debt in a perfect year is a business that defaults in an ordinary one, which is why no lender writes at 1.00.
It should, and it does here. A buyer who cannot pay themselves has not bought a business, they have bought a debt. Some lenders compute coverage before the owner's salary and then check separately that a living remains — the arithmetic is the same, but leaving your salary out of the ratio makes a deal look better than it is.
It is common, and it is not universal. Requirements vary by lender, by programme, by industry and by how risky the borrower looks, and they change over time. It is a field here rather than a constant for exactly that reason — put in what your lender has told you, not what a calculator assumed.
Four levers: a larger deposit so the loan is smaller, a longer term so each payment is lower, a lower price, or a seller note that shifts part of the debt to cheaper and more patient money. The calculator reports the largest loan that meets your required coverage, which tells you how far off you are rather than just that you are.
Buying a business
Business AffordabilityThe size of business your capital and income supportRelated calculators
An estimate. Lenders calculate coverage in slightly different ways and set their own requirements, which change. Use the figures your lender gives you.