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Debt Service Coverage Calculator

While several factors are considered in commercial loan underwriting, debt service coverage is primary among them and indicates a borrower's capacity to service a requested loan. This tool calculates debt service and illustrates how debt service coverage ratios are impacted by changing income and capital assumptions.
By changing any value in the following form fields, calculated values are immediately provided for displayed output values. Click the view report button to see all of your results.
Debt Service Coverage Ratio (DSCR) is 0 for Provided Inputs
*indicates required.
Required vs. Calculated Debt Service Coverage Column Graph: Please use the calculator's report to see detailed calculation results in tabular form.

Definitions

New loan amount

Total amount of your loan.

Amortization in years

Payment period in years.

Debt service ratio

Lenders set their own "Debt Service Coverage Ratios" for the income (cash flow) required to service the amount and terms of a loan/mortgage. A typical ratio is 1.25, but can be higher or lower depending on the loan and lender. The DSCR required for a new loan can vary by lender, asset quality, equity and other factors. You should check with your lender to determine the required DSCR for your existing or new loan.

Interest rate

Annual interest rate for this loan. Interest is calculated monthly on the current outstanding balance of your loan at 1/12 of the annual rate.

New monthly payment

Monthly payment for this loan.

EBITDARM

EBITDARM represents earnings before interest, taxes (income), depreciation, amortization, rent and management fees. This represents net operating income before 'provision for management fees' and after property expenses associated with real estate taxes and insurance.

Provision for management costs

Lenders typically require a provision for management costs of not less than 5% of revenue. The resulting EBITDAR represents operating cash flow available for debt service (or rent as applicable), before provision for capital expenditures.

EBITDR

EBITDR represents earnings before interest, taxes (income), depreciation and rent. This represents net operating income after 'provision for management fees'.

Provision for capital expenditures

Lenders typically require a provision for capital expenditures to fund capital needs associated with continuing operations.

Debt service coverage (DSC)

The debt service coverage is determined by dividing the total annual income available to pay debt service by the annual debt service requirement.

Horizon Bank
502 Franklin Street
Michigan City, IN 46360

Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.