Calculate Debt Service Coverage Ratio for loan applications and debt sustainability analysis.
DSCR = NOI / Total Debt Service. Most commercial lenders require 1.20x to 1.25x minimum.
The Debt Service Coverage Ratio (DSCR) is the most commonly used metric by lenders to assess whether a borrower can service their debt obligations. It answers a simple but critical question: does the property or business generate enough income to cover its loan payments?
DSCR is calculated by dividing Net Operating Income by Total Debt Service (principal plus interest). A DSCR of 1.0x means income exactly covers debt payments with nothing left over. Most commercial lenders require a minimum of 1.20x to 1.25x.
For real estate and infrastructure projects, mezzanine lenders typically require even higher coverage ratios (1.30x or more) because their debt sits behind the senior lender in priority.
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