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How to Calculate Debt Service Coverage Ratio: Step-by-Step Guide for Real Estate & Business Loans
Last Updated: April 22, 2025
What Is Debt Service Coverage Ratio (DSCR)?
Debt service coverage ratio shows whether rental income can pay for loan payments and property expenses. Calculate debt service coverage ratio using specific formulas that help evaluate property performance.
Understanding the Importance of DSCR
Lenders, investors, and business owners check the debt service coverage ratio when measuring property and portfolio health. Strong debt service coverage ratio signals cash flow can cover total loan commitments and expenses for properties. Low debt service coverage ratio alerts stakeholders about possible risk, especially for growth or refinancing.
