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.