Commercial Lending & Covenant Underwriting

DSCR Loan Underwriting Tool

Compute Debt Service Coverage Ratios (DSCR), evaluate banking covenant compliance, and calculate maximum commercial debt capacity.

Operating Cash Flow & Debt ObligationsStep 1 of 2

Gross Annual Revenue / Income ($)

Annual Operating Expenses ($)

Annual Principal Payments ($/yr)

Annual Interest Payments ($/yr)

Target Min DSCR

Loan APR (% Rate)

Amortization (Years)

Current DSCR Coverage

1.95x

Prime / Low Risk (Tier 1)

Net Operating Income

$410,000

Annual Debt Service

$210,000

Target Benchmark:1.25x DSCR

Max Allowable Debt Service:$328,000/yr

Annual Debt Service Buffer:+$118,000

Max Supportable Loan Amount:$3,867,308.69

Underwriting Headroom Rule

A DSCR buffer above 1.25x provides critical insurance against unexpected vacancy, tenant turnover, or sudden interest rate adjustments on variable rate financing.

DSCR Underwriting Formulas & Mathematics

The Debt Service Coverage Ratio is the single most critical cash flow metric utilized by commercial underwriters to evaluate corporate solvency.

1. Core DSCR Formula

Net Operating Income (NOI) = Gross Revenue - Operating Expenses

Total Debt Service = Annual Principal Repayments + Annual Interest Charges

DSCR = Net Operating Income ÷ Total Debt Service

2. Maximum Supportable Debt Formula

Maximum Allowable Annual Payment = Net Operating Income ÷ Target Minimum DSCR

Borrowing Capacity = Present Value of Annuity(Max Monthly Payment, APR, Term)

Frequently Asked Questions

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