What DSCR measures
DSCR is the yearly income available to pay debt divided by the yearly payments on that debt. For a property the income is the net operating income: rent less running costs such as insurance, repairs and management, before any loan payments. For a trading business it is usually EBITDA, earnings before interest, tax, depreciation and amortisation. A DSCR of 1.00 means the income exactly covers the payments, and anything below 1.00 means it does not.
The payments count principal and interest on all the debt, the new loan and the debt you already have. This calculator charges interest monthly at one twelfth of the quoted yearly rate, which is how a business loan is normally priced, so enter the rate on the offer and not an APR.
Worked example: a £650,000 loan on £90,000 of income
A property earns £90,000 a year after running costs, and the owner already pays £10,000 a year on other debt. A £650,000 loan at 7% repaid over 25 years costs £4,594.06 a month, or £55,128.78 a year. Together with the existing debt that is £65,128.78 of payments a year, so the DSCR is 1.38.
Against a lender that asks for 1.25, the income needed is £81,410.97, which leaves £8,589.03 of income above it. The largest loan the income supports at 1.25 is £731,015.67, and the income could fall by 27.63% before the DSCR reached 1.00. The income is 13.85% of the loan, which lenders sometimes call the debt yield.
Repayment or interest only
An interest-only loan pays no capital, so the payments are lower and the DSCR is higher. The same £650,000 loan interest only costs £3,791.67 a month, or £45,500.00 a year, and with the existing debt the payments are £55,500.00. The DSCR rises from 1.38 to 1.62, and the largest loan at 1.25 rises from £731,015.67 to £885,714.29.
The results list shows the DSCR and the largest loan on both bases whichever you choose, so you can compare them. Some lenders test an interest-only loan as if it were being repaid, so ask how yours treats it before relying on the higher figure.
Testing at a higher rate
Some lenders size a loan at a higher rate than the one you will pay, to allow for rates rising. Enter the extra points in the stress test field and the calculator shows the DSCR and the largest loan at that rate. With 2 points added to the 7% rate, the loan is tested at 9.00%, the DSCR falls from 1.38 to 1.19 and the largest loan at 1.25 falls from £731,015.67 to £615,668.38. Leave the field at zero if your lender does not do this.
When the income does not cover the loan
If the same property earned £50,000 a year, the DSCR would be 0.77, below the 1.25 asked for. The income would be £31,410.97 short of what 1.25 needs, and the largest loan the income supports would be £353,717.26, so borrowing £296,282.74 less would meet the minimum. You can also close the gap with a longer repayment period, an interest-only period, a lower rate or more income.
What this calculator leaves out
This is a planning check, not a credit decision. Lenders adjust income in their own way, for example by allowing for empty periods or removing one-off items, and some also look at loan to value, interest cover and the strength of the tenants or the business. The minimum you enter is your assumption. A loan that passes here can still be declined, and the largest loan shown is a ceiling on one test, not an offer. Fees, a balloon payment and a variable rate are not modelled.
To see the payment on a commercial mortgage, use the commercial mortgage calculator .
For the interest on an interest-only loan, use the interest only commercial loan calculator .
Use the right country page
This page uses UK terms and pounds: net operating income, EBITDA, repayment period and a lender's own minimum DSCR. The country choices above the inputs open separate local pages. Choosing United States opens the US DSCR commercial loan calculator, which uses US terms and can apply the SBA 7(a) minimums. The inputs reset and amounts are not converted.
Inputs for the UK DSCR commercial loan calculator
Yearly net operating income or EBITDA
Rent less running costs for a property, or EBITDA for a trading business, before debt payments and tax.
Yearly payments on existing debt
Principal and interest you already pay each year on other business debt. Enter zero for none.
New loan amount
How much you want to borrow.
Interest rate (nominal, not APR)
The yearly rate on the offer, charged monthly at one twelfth.
Payments on the new loan
Repayment pays off the capital and interest. Interest only pays just the interest.
Repayment period
The years the repayments are worked out over, in whole months. An interest-only loan ignores it.
Stress test: extra interest
Percentage points added to the rate to test the loan at a higher rate. Enter zero for none.
Your lender's minimum DSCR
The lowest ratio your lender accepts. The 1.25 shown is an illustration; use your lender's figure.
CALCULATOR QUESTIONS
UK DSCR commercial loan calculator questions
What is a good DSCR for a commercial loan?
Lenders set their own minimum. Broker guides quote figures from about 1.20 for property up to 1.50 or more for trading businesses, so use the figure your lender gives you. Below 1.00 the income does not cover the payments.
How do I calculate DSCR?
Divide the yearly net operating income or EBITDA by the yearly principal and interest on all debt. £90,000 of income against £65,128.78 of payments is a DSCR of 1.38.
How do I calculate DSCR on an interest-only loan?
Use the interest only as the payment: the loan times the yearly rate. A £650,000 loan at 7% is £45,500.00 a year, so with £10,000 of existing debt the DSCR on £90,000 of income is 1.62.
How much can I borrow for a given income?
Divide the income by the minimum DSCR, take off what you already pay, and turn the remaining yearly payment into a loan over your repayment period. £90,000 at 1.25 supports up to £731,015.67 here.
What is the difference between DSCR and interest cover?
Interest cover compares income with the interest alone. DSCR compares it with the interest and the capital repayments, so it shows the strain of a repayment loan.
Which income figure should I use?
Use the figure your lender will use. That is normally net operating income for an investment property and EBITDA for a trading business, before debt payments. Ask the lender what adjustments they make.
What happens when I change country?
The United States option opens the separate US DSCR commercial loan calculator, in dollars, with SBA 7(a) minimums. Your inputs are reset rather than converted.