Free tool · DSCR
DSCR Calculator (Debt Service Coverage Ratio)
See whether a business's cash flow covers its acquisition-loan payments by the margin lenders require. Enter the cash flow and loan terms to get the debt service coverage ratio.
SBA and most acquisition lenders look for a debt service coverage ratio of at least 1.15 to 1.25. Higher means more cushion between cash flow and loan payments.
Why DSCR matters in a business acquisition
DSCR is the first number an acquisition lender checks. It tells them whether the business throws off enough cash to make the loan payments with room to spare. A debt service coverage ratio below the lender's threshold — usually 1.15 to 1.25 — means the deal needs a bigger down payment, a longer term, a lower price, or a seller note to get financed.
How to use this calculator
Enter the annual cash flow (SDE or EBITDA) and the loan amount, rate, and term. The calculator returns the DSCR plus the monthly and annual debt service. For more on financing a purchase, see our guides on using an SBA loan to buy a business and buying an existing business.
Frequently asked questions
DSCR is annual cash flow divided by annual debt payments. A DSCR of 1.25 means the business generates $1.25 of cash flow for every $1.00 of loan payment — a 25% cushion. Below 1.0 means cash flow does not cover the debt.
Most SBA 7(a) and conventional acquisition lenders want a DSCR of at least 1.15 to 1.25 on the post-acquisition cash flow. Some require more for riskier industries. Higher is always better.
Increase the down payment (smaller loan, lower payment), extend the loan term, negotiate a lower price, or add a seller note on standby. Each lowers the annual debt service relative to cash flow.
Lenders typically use SDE or EBITDA — the normalized profit available to service debt, after add-backs but before the new loan payment. Use the cash flow the business will produce under your ownership.
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