What DSCR do I need for a small business loan? Debt Service Coverage Ratio is the single most important underwriting number across SBA, bank, and most non-bank term lenders. SBA SOP 50 10 sets a 1.15 floor for 7(a) loans; bank-tier programs commonly require 1.25+; non-bank lenders flex down to 1.0 – 1.15. This calculator shows your DSCR and which tier opens up — including pro-forma DSCR once a new loan is layered in.
Quick answer: Calculate your Debt Service Coverage Ratio in 5 seconds — and see exactly which financing tier your file qualifies for (SBA, bank, non-bank, or below).
Trailing DSCR = Annual net operating cash flow ÷ Existing annual debt service Pro-forma DSCR = Annual net operating cash flow ÷ (Existing annual debt service + New loan annual debt service) Tier thresholds (typical, lender-dependent): • SBA 7(a): 1.15× minimum (SOP 50 10) • SBA 504: 1.15× minimum, 1.25× lender-comfort • Bank term: 1.25× minimum • Non-bank term: 1.0× – 1.15× flex range • Below 1.0×: net cash flow doesn't cover debt service — credit-led products decline
Assumptions
Pro-forma DSCR 1.60× — clears bank-tier (1.25+) and SBA (1.15+) thresholds with cushion. Credit-led products in scope.
Pro-forma DSCR 1.18× — clears SBA 7(a) (1.15+) but below bank-tier (1.25+). SBA conversation is realistic; conventional bank term loan likely not on this file.
Trailing DSCR 0.86× — existing debt service already exceeds operating cash flow. Stacking is dangerous; consolidation/refinance is the conversation, not new debt. Run the MCA Refinance Calculator.
1.25× or higher is the standard bank-tier minimum. SBA 7(a) accepts 1.15× under SOP 50 10 (though individual PLP banks can require higher). Non-bank term lenders are more flexible — often accepting 1.0× to 1.15×. Below 1.0× means net operating cash flow doesn't cover existing debt service, and most credit-led products will decline.
DSCR = annual net operating cash flow ÷ annual debt service. Net operating cash flow is revenue minus operating expenses (before debt service and taxes — add depreciation back in if pulling from a P&L). Annual debt service is the sum of all principal + interest payments across existing debts plus any new loan being modeled.
DSCR (debt service coverage ratio) is a business metric — operating cash flow divided by total annual debt service. DTI (debt-to-income) is a personal-finance metric — total monthly debt payments divided by gross monthly income. Business lenders underwrite DSCR; personal mortgage and consumer lenders use DTI. SBA underwriting touches both because owners personally guarantee.
Trailing DSCR uses existing debt service only — what the business is paying today. Pro-forma DSCR includes the new loan you're applying for. Lenders credit-decision against pro-forma DSCR, not trailing — they need to see the file still covers debt service after the new loan layers in. Always model both before applying.
Yes — MCA daily/weekly debits get annualized and rolled into debt service for underwriting purposes. Heavy MCA stacking is the single fastest way to crater DSCR. A file at 1.40 DSCR pre-MCA can drop below 1.0 after two stacked positions. Lenders pull bank statements and read the debits directly; there's no hiding them.
Below 1.0 means operating cash flow doesn't cover existing debt service — credit-led products will decline. The conversation isn't new debt; it's restructuring existing debt (refinance high-cost positions into a longer term, lower rate), cutting operating costs, or growing revenue. New debt on a sub-1.0 file compounds the problem.
Yes. Three levers: (1) grow operating cash flow — typically takes a quarter or two; (2) pay down expensive short-term debt (especially MCA balances), which lowers the debt-service denominator; (3) refinance short-term debt into longer terms, which spreads the same principal over more months and lowers annualized debt service. Most lenders look at trailing 12 months, so improvements take time to show.
SBA 504 (real estate / fixed asset financing through a CDC + bank partnership) typically requires 1.15× minimum on the combined CDC + bank debenture, with many CDCs underwriting closer to 1.25×. Owner-occupied commercial real estate is the typical use case. DSCR is computed on the operating business + global cash flow including projected real estate income.