Home/Resources/Glossary/DSCR (Debt Service Coverage Ratio)
Glossary Term

DSCR (Debt Service Coverage Ratio)

A lender's measure of whether your cash flow comfortably covers loan payments.

All glossary terms

In short

DSCR — Debt Service Coverage Ratio — is a lender's measure of whether your cash flow comfortably covers your loan payments. It compares your available income to your debt obligations. A ratio above 1.25 is generally seen as healthy.

How DSCR is read

The ratio divides the cash a business has available to service debt by the debt payments it owes. The result tells a lender how much cushion you have:

  • Above 1.25 — generally considered healthy; income comfortably exceeds payments.
  • Around 1.0 — income just barely covers payments, with little margin.
  • Below 1.0 — payments exceed available cash flow, a warning sign for lenders.

Why it matters to your application

DSCR is one of the clearest ways a lender gauges affordability. A stronger ratio can improve your chances and your terms, because it shows the business can absorb the new payment. If your ratio is tight, a larger down payment, a longer term, or waiting for stronger financials can help — always at the lender's discretion.

Common questions

What DSCR do I need to get approved?

Many lenders look for 1.25 or higher, but requirements vary by lender, asset, and overall profile. A tighter ratio isn't automatically a decline.

How can I improve my DSCR?

Increase available cash flow, reduce existing debt obligations, or structure the new deal with lower payments (for example, a longer term or larger down payment).

General information only. This page is educational and does not constitute financial, legal, or tax advice. All financing is subject to credit review and lender approval. Rates, terms, and eligibility vary by applicant, asset, and lender, and are not guaranteed. Any figures or examples are illustrative. Please speak with a qualified advisor about your specific situation.