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DSCR (Debt Service Coverage Ratio) Calculator

Your Debt Service Coverage Ratio is:
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function calculateDSCR() { var noi = parseFloat(document.getElementById('annualNOI').value); var debt = parseFloat(document.getElementById('annualDebt').value); var resultContainer = document.getElementById('dscr-result-container'); var valueDisplay = document.getElementById('dscr-value'); var statusDisplay = document.getElementById('dscr-status'); if (isNaN(noi) || isNaN(debt) || debt = 1.25) { statusDisplay.innerText = "Strong Coverage (Lender Approved)"; statusDisplay.style.color = "#2f855a"; statusDisplay.style.backgroundColor = "#f0fff4"; } else if (dscr >= 1.0) { statusDisplay.innerText = "Adequate Coverage (Tight)"; statusDisplay.style.color = "#c05621"; statusDisplay.style.backgroundColor = "#fffaf0"; } else { statusDisplay.innerText = "Negative Cash Flow (High Risk)"; statusDisplay.style.color = "#c53030"; statusDisplay.style.backgroundColor = "#fff5f5"; } }

Understanding the Debt Service Coverage Ratio (DSCR)

The Debt Service Coverage Ratio (DSCR) is a critical financial metric used by lenders and investors to determine if a property or business generates enough income to cover its debt obligations. In commercial real estate, this ratio is the primary benchmark for loan eligibility.

The DSCR Formula

DSCR = Net Operating Income (NOI) / Annual Total Debt Service

Key Components

  • Net Operating Income (NOI): Your total revenue minus all necessary operating expenses (excluding taxes, interest, and depreciation).
  • Annual Total Debt Service: The total amount of principal and interest payments due over one year.

What do the results mean?

Lenders use the following thresholds to evaluate risk:

  • DSCR > 1.25: This is generally the industry standard for a "safe" loan. It indicates there is 25% more income than required to pay the debt.
  • DSCR = 1.00: The entity is breaking even. There is no margin for error if expenses rise or income dips.
  • DSCR < 1.00: This indicates negative cash flow. The entity is not generating enough income to pay its debts and must use reserves or personal capital to cover the shortfall.

Example Calculation

If a commercial apartment complex generates $250,000 in Net Operating Income and has an annual mortgage payment of $180,000:

$250,000 / $180,000 = 1.39 DSCR

In this scenario, the borrower would likely qualify for financing as the ratio exceeds the common 1.25 benchmark.

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