DSCR Calculator

What DSCR Means and Why Lenders Care

Debt Service Coverage Ratio is the number that decides whether your SBA loan gets approved, regardless of your credit score or collateral. Lenders need to see that the business throws off enough cash to cover the debt with margin to spare. The minimum threshold for SBA 7(a) is typically 1.15x; conservative underwriters want 1.25x.

DSCR below 1.0x means the business cannot service the proposed debt even theoretically. Anywhere between 1.0x and 1.15x and the deal either gets rejected or requires structural changes (lower price, higher down payment, longer amortization).

The Calculation, Step by Step

1. Start with SDE. Use the SDE calculator if you have not normalized earnings yet. SDE is the cash flow available to a single owner-operator before debt service.
2. Subtract your required owner salary. SBA lenders expect the buyer to draw a salary that reflects the time and skill the role requires. A $250K SDE business where the buyer takes $50K is not really $250K of available cash flow.
3. Compute annual debt service on the proposed loan at the lender's indicative rate and term.
4. Divide. Available cash flow ÷ annual debt service = DSCR.

What Counts as a “Reasonable” Salary?

Lenders compare your stated salary against industry standards for the role. For most small-business operators, that means $60K–$120K depending on industry and geography. Setting your salary at $30K to artificially boost DSCR will get rejected; lenders see this pattern often and underwrite against it.

Typical Results in 2026

With SBA 7(a) rates at 10–12%, a 10-year amortization, and a 10% down payment, the single biggest determinant of DSCR is whether the deal's SDE multiple is reasonable for its category. A business priced at 4x SDE will rarely pencil out at 1.15x DSCR; one priced at 2.5x usually does, with a moderate owner salary.