What is DSCR?

The debt-service coverage ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. DSCR measures a business’s cash flow versus its debt obligations. Lenders use DSCR to determine whether a business or income property has enough net operating income to pay back loans.

The debt-service coverage ratio shows how well the business or income property can cover any potential debt payments, so it’s used by lenders to see if you fit their qualifications before offering you business funding. It’s typically calculated using this formula: DSCR = net operating income / annual debt service.