Business finance glossary
DSCR (Debt Service Coverage Ratio)
Net operating income divided by total debt payments — the core lending metric for business and commercial real estate loans.
Debt Service Coverage Ratio (DSCR) measures how many times a business or property's income covers its required debt payments. The formula is: Net Operating Income (NOI) / Total Annual Debt Service. A DSCR of 1.0 means the cash flow exactly covers the debt payments with nothing left over. Most lenders require a minimum DSCR of 1.20–1.25 for business loans and 1.20–1.30 for commercial real estate — providing a cushion against income variability. A DSCR below 1.0 means the business cannot service its debt from operating income alone. For SBA loans, the SBA requires a global DSCR (including the owner's personal income and obligations) of at least 1.0.