DSCR Calculator with rate and NOI stress

The Debt Service Coverage Ratio formula is DSCR = Net Operating Income ÷ Annual Debt Service. NOI is income after operating expenses but before debt service, taxes, and depreciation. Annual debt service is total annual principal and interest payments on all debt being measured.

Most commercial banks underwrite to a minimum DSCR of 1.20x to 1.25x for commercial real estate, and 1.25x to 1.50x for C&I and SBA deals. Anything below 1.0x means the borrower cannot cover debt service from operating cash flow. Anything above 1.50x is generally considered strong. Specific minimums vary by loan policy, asset type, and risk grade.

Banks typically stress DSCR by simulating an interest rate increase (commonly +100 to +300 basis points), an NOI decline (commonly 10% to 20%), or both at once. The stressed DSCR shows whether the loan still covers debt service under realistic adverse conditions. Many credit policies require both an in-place DSCR and a stressed DSCR above 1.0x or 1.10x.

NOI (Net Operating Income) is a dollar amount — income after operating expenses but before debt service. DSCR is a ratio that measures whether NOI is enough to cover debt service. NOI feeds into DSCR — you cannot calculate DSCR without first calculating NOI.

It depends on the loan policy. Some banks calculate DSCR using NOI before capital expenditures (the cleaner cash-flow view used in CRE underwriting). Others require a more conservative DSCR after deducting reserves for replacement or actual capex. SBA underwriting typically uses cash flow after distributions to owners.

Property-level DSCR measures whether one asset's NOI covers the debt secured by that asset. Global DSCR measures whether the combined cash flow of the borrower, related entities, and guarantors covers all related debt service. SBA deals and owner-occupied CRE almost always require a global DSCR analysis.

SBA 7(a) underwriting typically requires a minimum global DSCR of 1.15x to 1.25x, including all business and personal debt service of the borrower and guarantors. SBA SOP language is principles-based — lenders set the specific threshold in their credit policy. The most common policy is 1.25x global DSCR.

Multi-family DSCR uses NOI from the property's rent roll, less vacancy and operating expenses, divided by annual debt service. Most agency lenders (Fannie Mae, Freddie Mac) underwrite to 1.20x to 1.25x DSCR. Many also require a debt yield test (NOI ÷ loan amount) of 8% to 10%.

Yes — taxes and insurance are operating expenses that come out of NOI before DSCR is calculated. Annual debt service in the denominator is principal and interest only, not impounds. If property taxes or insurance go up, NOI drops, and DSCR drops with it.