Debt Service Coverage Ratio (DSCR) is the #1 metric lenders use to approve SBA loans. Calculate your global DSCR instantly.
Your business net income before taxes, interest, depreciation, and amortization (EBITDA).
Total annual principal and interest payments on current debt.
Expected annual payments for the new SBA loan.
Lenders divide your NOI by your total debt service. Most SBA lenders require a minimum DSCR of 1.25x.
The Debt Service Coverage Ratio (DSCR) is arguably the most important metric an SBA lender will review. It simply measures whether your business generates enough cash flow to cover its current debt obligations plus the proposed new SBA loan.
To use this calculator, you need to input your Net Operating Income (NOI), which is usually your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) plus any owner add-backs. Then, enter your existing yearly debt payments and the projected yearly payments of your new loan.
Most SBA 7(a) lenders require a minimum DSCR of 1.25x. This means for every $1 in debt obligations, your business must generate $1.25 in cash flow. A DSCR of exactly 1.0x means you have zero margin for error.
If your DSCR falls below 1.25x, it is considered high risk. You will likely be denied a standard 7(a) loan unless you can inject more equity (reducing the loan size), restructure existing debt, or prove strong projected growth. Some alternative SBA programs may accept a 1.15x ratio under strict conditions.
You can find your NOI by looking at your business tax returns or Profit & Loss statement. Take your Net Income and add back Interest, Taxes, Depreciation, Amortization, and any excessive owner compensation that will not continue after closing.