DSCR = yearly cash flow available for debt payments divided by yearly debt payments. The loan calculator on this page gives the monthly payment for a new loan; multiply it by 12, add the other yearly debt payments, and divide. Invented examples show a shop, a contractor and a second location.
How Do You Calculate DSCR on a Loan: Numbers a Retail Shop Can Pull From Its Books
Two numbers make the ratio. The top one is the cash flow available for debt payments over a year: the year's net operating income from the profit and loss statement, counted before interest and before noncash charges such as depreciation. The bottom one is every debt payment due in the same year, principal and interest together, for each loan, lease and line.
| Line | Figure |
|---|---|
| Yearly cash flow available for debt payments | $84,000 |
| Current debt payments per month | $2,450 |
| Yearly debt payments (x 12) | $29,400 |
| DSCR (cash flow / debt payments) | 2.86 |
Illustration only, invented figures: $84,000 divided by $29,400 gives a ratio of 2.86, meaning the shop's cash flow covers its current debt payments 2.86 times over.
Debt Service Coverage Ratio Example and the Contractor Figures Behind Bonding-Ready Cash
A contractor that wants to keep bonding-ready cash on hand and take on a new loan can test both at once. The new loan's payment joins the yearly debt total, and the ratio is worked out again.
| Line | Figure |
|---|---|
| Yearly cash flow available for debt payments | $132,000 |
| Current yearly debt payments | $43,200 |
| DSCR before the new loan | 3.06 |
| New loan amount | $70,500 |
| Rate (annual %) | 10.5% |
| Term (months) | 60 |
| Monthly payment (rounded) | $1,515.32 |
| Total repaid (60 rounded payments) | $90,919.20 |
| New yearly payments (x 12) | $18,183.84 |
| DSCR after the new loan | 2.15 |
Illustration only, invented figures: the ratio falls from 3.06 to 2.15 once the new payments are counted. The cash flow still covers all the debt, with less room left over for a slow-paying job.
The Payment Calculator Inputs a Clinic Owner Already Has
The loan calculator on this page asks for three inputs and shows three results. A clinic owner already has the inputs in the loan quote or the term sheet, and the cash flow side in the profit and loss statement.
| Calculator field | Where a clinic finds it |
|---|---|
| Amount ($) | The loan amount being considered |
| Rate (annual %) | The annual rate in the quote, entered as a percent |
| Term (months) | The number of monthly payments |
| Estimated monthly payment | Shown by the calculator; times 12 gives the new yearly payments |
| Total interest and total repaid | Shown by the calculator; not part of the ratio |
The calculator does not compute DSCR. It gives the payment; the ratio is the division worked by hand, as in the tables on this page.
Reading a Debt Service Coverage Ratio Result Before a Second Location
A ratio of 1.00 means the cash flow exactly covers the debt payments, with nothing left over. Below 1.00, the payments need more cash than the business produces. Above 1.00, the extra is the cushion. Each funding partner sets its own minimum, and the ratio is one part of a review that also covers statements, credit and collateral.
| Line | Figure |
|---|---|
| Rate (annual %) | 11% |
| Term (months) | 48 |
| Monthly payment (rounded) | $1,169.51 |
| Total repaid (48 rounded payments) | $56,136.48 |
| Yearly debt payments with the new loan | $43,434.12 |
| DSCR on the first store's cash flow alone | 1.93 |
Illustration only, invented figures: the ratio drops from 2.86 to 1.93. It is worked on the first store's cash flow only, because the second location has no sales record yet. A ratio that stays above 1.00 on that basis does not lean on a guess about the new store. With the ratio worked out, a call to (307) 381-3526 or the request form opens the request itself.
By Meadowhollow Business Capital ยท Updated