What is Debt Service Coverage Ratio (DSCR)?
Debt Service Coverage Ratio (DSCR) is the amount of cash flow a company has to cover its debts over the period of one year. The ratio is the net operating income compared to the amount of debt being serviced including interest, principal, and lease payments. It has become a popular benchmark for determining a company’s approval for a loan. In smaller companies, the owner’s salary must be covered too. Lenders typically like to see a DSCR of 1.25 or higher.
Audio Definition/Pronunciation
OTHER TERMS BEGINNING WITH "D"
- Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO) is a measure of the average number of days that a company takes to collect revenue after a sale has been made. DSO is often determined on a monthly, quarterly or annual basis and can be…
- Debt Consolidation
Debt consolidation combines multiple high-interest debts, such as credit cards, lines of credit or merchant cash advances, into a single monthly payment. Ideally, it’s used to lower the overall monthly payment of all debt along with decreasing the repayment period.…
- Debt Financing
Debt Financing is when a company borrows money from a lender with the principal and interest being paid back in scheduled payments.
- Debtor-in-Possession (DIP)
Debtor-in-Possession (DIP) is funding provided to a company that has filed for chapter 11 bankruptcy protection from creditors. It is typically available to companies where lenders believe the company has a credible chance and a viable plan to turn itself…
- Deductions
Deductions are funds subtracted from the customer (the account debtor) when paying a client’s invoice (other than discounts) and are typically unknown to the factoring company. If known to the Factor’s client they should be disclosed immediately.
- Deposit Account Control Agreement (DACA)
Deposit Account Control Agreement (DACA) is an agreement between a debtor, secure party and the debtors bank where the bank agrees that the secure party controls the deposit account of the debtor. This agreement is part of the Uniform Commercial…
- Depreciation
Depreciation is used in accounting to calculate the decreased value of business assets over multiple years. Examples may include machinery, vehicles, furniture, computers and equipment. All of which lose value over time. Businesses depreciate these long-term assets for both tax…
- Depreciation & Amortization
Capital expenses are either amortized or depreciated depending upon the type of asset acquired through the expense. Tangible assets are depreciated over the useful life of the asset whereas intangible assets are amortized.
- Dilution
Dilution is comprised of discounts, chargebacks, credit memos, marketing allowances, end cap & slotting fees and other deductions that reduce the final payment amount against an Invoice.
- Directional Boring Financing
Directional boring or directional drilling companies need financing as labor and equipment must be paid for immediately, but your customers can take 60-90 days to pay you. Invoice Factoring is a common financing option for directional boring companies.
- Discount
A Discount is a reduction in the selling price of the merchandise as indicated by the "Terms of the Sale". There are two major types: An early pay or cash discount is an incentive for quicker payment from your B2B…
- Due Diligence
Due Diligence is researching a business and its owners in preparation for a business transaction. ACH and MCA lenders will have minimal due diligence and conversely, be the MOST expensive source of capital. A bank line will have the most…