DSCR Calculator
See whether a business generates enough cash to cover its acquisition loan. Enter the cash flow and loan terms to get the debt service coverage ratio that SBA lenders underwrite to.
DSCR is annual cash flow divided by annual debt service. SBA lenders typically want at least 1.25x, computed on adjusted cash flow after an owner salary, capex, and rent are accounted for. This estimate uses the cash flow you enter as-is.
Why DSCR decides whether a deal gets financed
The debt service coverage ratio is the single number a lender looks at first. It answers one question: after the business pays its acquisition loan, is there money left over? A DSCR of 1.25x, the common SBA threshold, means the business earns 25% more than the annual payment, so there is a buffer for a slow quarter and a paycheck for the owner.
Run a deal through this calculator before you make an offer. If coverage is tight, you can see exactly how much a bigger down payment, a lower price, or a longer term would help, and whether the deal is worth pursuing at all.
Frequently asked questions
What is a good DSCR?
Lenders generally look for a DSCR of at least 1.25x, meaning the business earns 25% more than its annual loan payments. Higher ratios leave more cushion and are safer for the buyer.
How is DSCR calculated?
DSCR equals annual cash flow divided by annual debt service (principal plus interest). A 1.5x DSCR means the business produces $1.50 of cash flow for every $1.00 of loan payments.
Which cash flow figure should I use?
Use adjusted cash flow (SDE or EBITDA) after a market-rate owner salary and normalized capex. Lenders make these adjustments before running the ratio, so your estimate should too.
What happens if DSCR is below 1.0?
A DSCR under 1.0 means the business does not generate enough cash to cover the loan payments. You would need a larger down payment, a lower price, or a longer term to make the deal work.
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