Debt service coverage ratio (DSCR) calculator

DSCR is a single number a credit analyst can read in two seconds: how many times your business’s cash earnings cover its loan repayments. At 2.0×, the business earns twice what it owes each year. At 0.9×, it’s falling short. Because so much of a bank’s decision hangs on this ratio, it pays to know yours before you apply, and to know what a new loan would do to it.

How the calculator works

There are only three boxes.

1. Annual earnings before interest, tax, depreciation ($). Start with net profit, then add back interest expense, income tax and depreciation (and amortisation, if you have it). Your accountant may call this EBITDA. Use a full financial year where you can.
2. Annual principal and interest repayments ($). Twelve months of payments on everything the business owes: term loans, equipment and vehicle finance, leases, and any ATO payment arrangement you’re meeting.
3. Proposed new annual repayments ($). The yearly repayments on the loan you’re thinking about, taken from a quote. Leave it at 0 to see only where you stand today.

From those, it calculates:

Result	Formula	Why it matters
DSCR today	Earnings ÷ current repayments	Your starting position. Shows “No debt” if repayments are 0
DSCR with the new loan	Earnings ÷ (current + new repayments)	The figure a lender will actually assess
Spare cash after repayments	Earnings − current − new repayments	Dollars left for tax, drawings, growth and surprises. Can go negative
How lenders tend to read it	Banded reading of the post-loan ratio	A quick sense of how your application will land

The reading uses four bands: 1.5× or more is “comfortable for most lenders”; 1.25× to under 1.5× is “acceptable to many lenders”; 1.0× to under 1.25× is “tight: expect questions”; and below 1.0× means repayments exceed earnings. These are general signposts, not any lender’s policy.

Worked example: a café owner buying a second site

A café business earns $310,000 a year before interest, tax and depreciation. It already repays $140,000 a year on its fit-out loan and coffee equipment.

• DSCR today: $310,000 ÷ $140,000 = 2.21×. Comfortable.

The owner has a quote to buy a second café, with repayments of $85,000 a year.

• DSCR with the new loan: $310,000 ÷ $225,000 = 1.38×. Acceptable to many lenders.
• Spare cash after repayments: $85,000.

That spare cash looks reasonable until you remember it has to pay income tax and the owner’s living costs. Some lenders will deduct both before running the ratio, which could drag it near 1.0×. The stronger move here is to present the second café’s own earnings as part of the case. If the site being bought earns $90,000 a year, a lender that credits those earnings sees $400,000 against $225,000, or 1.78×. That’s exactly the kind of argument a business acquisition loan application should make.

Finding the largest repayment a target ratio allows

The calculator tests a repayment you enter, but you can turn it around with simple arithmetic:

Maximum new yearly repayment = (earnings ÷ target DSCR) − current repayments

For the café: at 1.5×, $310,000 ÷ 1.5 = $206,667, minus $140,000 leaves $66,667 a year. At 1.25×, $248,000 minus $140,000 leaves $108,000. If you’d like the calculator to go one step further and turn that room into a loan amount using a quote’s cost, the business borrowing power calculator does exactly that.

Want to know which lenders work at 1.25× rather than 1.5×? Put your figures to a specialist. It’s a quick form and doesn’t add an enquiry to your credit report.

Why a lender’s DSCR might differ from yours

The ratio is simple; the inputs are where the arguments happen.

• Owner’s pay. In a company, directors’ wages already sit above the profit line. In a sole trader or partnership business, they don’t, so many lenders take a living allowance off earnings first.
• Tax. Some credit teams deduct income tax because it’s a real cash outflow, even though EBITDA ignores it.
• Rent and leases. A few lenders roll rent into the repayment side of the calculation, which pushes the ratio down for businesses with expensive premises.
• Which year. A single strong year may be averaged with a weaker one. The RBA’s October 2025 Bulletin noted that small business margins have held up but cost growth remains high by historical standards, so lenders are watching whether recent profit is repeatable.
• Facility limits, not balances. An overdraft or line of credit may be tested as if fully drawn.

If your number and the bank’s differ, ask which of these adjustments it made. The answer often points to a fix: an updated set of accounts, a clearer add-back schedule, or paying out a small loan that’s dragging the ratio down. The business loan repayment calculator helps model that last option.

When the ratio is tight, what are the options?

A tight or sub-1.0× result isn’t the end of the road, but it changes where to look.

• Lengthen the term. Spreading repayments over more years lowers the yearly figure and lifts the ratio, at a higher total cost.
• Refinance expensive short-term debt. Daily-repayment loans or a merchant cash advance can wreck a DSCR; consolidating them can repair it. See refinancing expensive short-term business debt.
• Use property security. Lenders that secure against a home or commercial premises often weigh the equity more than the ratio. Our secured vs unsecured comparison explains the trade-off.
• Choose a lender that assesses differently. Non-bank lenders may look at turnover and bank statements instead of annual accounts. Our bank vs non-bank lender comparison covers how the assessments differ.

Banks are often the cheapest money available, so if your DSCR sits comfortably above 1.5× and your accounts are current, start with your bank. If it already said no, declined by the bank walks through the next steps. Ongoing ratio requirements written into loan contracts are explained under loan covenant.

Got your ratio? Let’s see who’ll lend on it

A ratio on its own doesn’t get you funded, but it tells us a lot about which lenders will say yes quickly and which will ask for more. Whether you’re at a healthy 1.8× or hovering just over 1.0×, there’s usually a lender built for that profile.

Telling us about it takes around sixty seconds, and your credit score isn’t touched just for enquiring. Your file stays with us rather than being forwarded to every lender going; a specialist works through the numbers personally and then rings you. Enter the same earnings and repayments you used here, accurately, so we can line up a lender whose assessment fits your business from the start.

Show me lenders that fit my DSCR →