What Is DSCR?

Debt-Service Coverage Ratio (DSCR) is one of the most important metrics in real estate and business lending. It measures the cash flow available to cover debt payments, expressed as a ratio.

How it is calculated

In its simplest form, DSCR is net operating income divided by total debt service. A DSCR of 1.0 means income exactly covers the debt payments. A ratio above 1.0 indicates a cushion; below 1.0 indicates the property or business is not generating enough to cover its debt from operations.

Why it matters

Many lenders set a minimum DSCR as a condition of financing, particularly for investment property. A stronger ratio can support better terms and larger loan amounts, while a thin ratio may reduce proceeds or require additional support. Minimum thresholds vary by lender and program.