Business Loan Payment & DSCR Calculator
Calculate the monthly payment on a business loan and the debt service coverage ratio lenders use to check repayment capacity.
DSCR = net operating income ÷ annual debt service. A $500,000 loan at 8% over 10 years costs $72,796.56 a year; with $100,000 NOI the DSCR is 1.37×.
Build your scenario
Use your actual figures where available. The output is an educational estimate based on the assumptions below.
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How DSCR works
DSCR compares the cash a business or property earns with what it owes in loan payments each year. Above 1.0 means income covers the payments; below 1.0 means it does not. Each lender sets its own minimum, so check with yours.
Worked example
$500,000 at 8% over 10 years: $6,066.38 a month, $72,796.56 a year. $100,000 ÷ $72,796.56 = 1.37×.
DSCR at different income levels
Same loan as the worked example: $500,000 at 8% over 10 years, or $72,796.56 of debt service a year.
| Net operating income | DSCR | What it usually means |
|---|---|---|
| $60,000 | 0.82× | Income does not cover the payments |
| $80,000 | 1.10× | Covered, but below many lenders' 1.20×–1.25× benchmark |
| $100,000 | 1.37× | Clears a 1.25× benchmark |
| $120,000 | 1.65× | Comfortable cushion |
How much can I borrow at a 1.25× DSCR?
Work backwards: maximum annual debt service = NOI ÷ target DSCR. With $100,000 of NOI and a 1.25× target, that is $80,000 a year, or $6,666.67 a month. At 8% over 10 years, that payment supports a loan of about $549,477. A higher rate or a shorter term lowers the amount. Lenders also look at collateral, credit history and cash flow, so treat this as a ceiling, not an offer. The DSCR guide explains what counts as NOI and debt service.
Sources
- U.S. Small Business Administration: loans
- OCC Comptroller's Handbook: Commercial Real Estate Lending (covers debt service coverage)
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Frequently asked questions
How do you calculate DSCR?
Divide net operating income by annual debt service. $100,000 ÷ $72,796.56 = 1.37×.
What does a DSCR of 1.0 mean?
Income exactly covers loan payments with nothing left over.
Does DSCR include existing loans?
It should. Add other annual debt payments so the ratio covers all debt.
What DSCR do lenders require?
Many commercial and SBA-style lenders look for roughly 1.20× to 1.25× or more, and some ask for more on riskier loans. There is no single legal minimum; each lender sets its own policy.
How do I improve my DSCR?
Raise net operating income, cut operating costs, borrow less, or spread the loan over a longer term so annual debt service falls. Paying off other debts the lender counts also helps.
Educational information only; not financial, tax, legal, or investment advice.