Debt Coverage Ratio Calculator: Assess Your Company’s Financial Health
Type your Net Operating Income and total debt payments, press Calculate, and see your Debt Coverage Ratio immediately. Lenders usually want DCR ≥ 1.25 for new commercial loans (SBA SOP 50 10 7, 2023).
Debt Coverage Ratio Calculator
Debt Coverage Ratio:
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How to use the tool
Follow these steps to gauge how comfortably your business covers debt payments:
Enter Net Operating Income (NOI): The profit from operations before interest and taxes. Example inputs: 180 000 or 220 500.
Enter Total Debt Service: Sum of principal and interest due for the same period. Example inputs: 90 000 or 150 000.
Select “Calculate”. The tool divides NOI by Debt Service and shows your Debt Coverage Ratio (DCR).
Median U.S. small-business DCR: 1.31 (Federal Reserve Small Business Credit Survey, 2023).
Interest coverage differs: it uses EBIT/Interest only (Investopedia, https://www.investopedia.com).
FAQ
What is the Debt Coverage Ratio?
The Debt Coverage Ratio measures how many times your operating income can pay current debt obligations, signalling repayment capacity (FDIC Community Bank Study, 2022).
Why do lenders set a 1.25 benchmark?
A 25 % surplus cushions profit swings and reduces default risk; SBA guidelines list 1.25 as a prudent minimum (SBA SOP 50 10 7, 2023).
Do I include taxes in NOI?
No. Net Operating Income excludes taxes and interest to focus on core operations (IRS Pub. 535, 2023).
Should I use annual or monthly figures?
Use matching periods—annual data for strategic planning, monthly data for cash-flow monitoring—so the ratio remains meaningful (RMA Annual Statement Studies, 2023).
How can I improve a low DCR?
Increase operating income, cut discretionary costs, refinance at lower rates, or extend amortizations to shrink periodic payments (Harvard Business Review, 2021).
Is DCR the same as Debt-to-Income ratio?
No. DCR compares cash flow to payments, while DTI compares total debt to gross income; DTI is common in personal finance (CFPB, https://www.consumerfinance.gov).
What happens if my DCR falls below 1?
Cash flow cannot cover scheduled payments; lenders may restrict dividends, demand extra collateral, or trigger loan covenants (Basel III Pillar 3, 2023).
How often should I recalculate?
Quarterly reviews detect trends early; 59 % of banks update borrower DCR every 90 days (Crowe Credit Risk Survey, 2022).
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