Debt service coverage ratio calculator
Debt service coverage ratio is net operating income divided by total annual debt service, existing debt plus a proposed loan's own payment. Enter your numbers to check it against 1.1, the floor SBA 7(a) Small Loan underwriting holds to today.
annual, before debt service
Clears the 1.1 floor.
The math
A starting point, not underwriting. Your lender's own analysis, often including a global cash flow review of the buyer personally, decides the number that matters. SBALoanLenders does not lend and does not underwrite.
How this is calculated
Net operating income divided by total annual debt service: existing debt payments plus the proposed loan's own payment, amortized at the rate and term you enter. A ratio above 1 means the business generates more than its debt service; a ratio at 1.1 means it generates 10 percent more.
What this leaves out
This checks the business alone. A full underwriting review often folds in the buyer's personal income and personal debt through a global cash flow analysis, and a lender's own addback rules for net operating income can differ from a simple EBITDA figure. Confirm both with your lender before treating this number as final.
Before you send this to a lender
- What counts as net operating income?
- The cash the business generates before debt service: net income with interest, taxes, depreciation, and amortization added back, plus any owner compensation above a reasonable replacement salary a lender will also add back. A lender's exact addback list varies, so confirm theirs before you rely on your own number.
- What counts as existing debt service?
- Every payment on debt the business already carries: term loans, equipment finance, lines of credit at their required payment, and any other loan staying in place after this one closes. Debt being paid off with this loan's proceeds does not count twice.
- Is 1.1 the number every lender uses?
- It is the published floor for the current SBA 7(a) Small Loan process, not a ceiling and not every lender's own standard. Many lenders hold to a higher ratio, especially on a thinner deal or a newer business, so clearing 1.1 here is a starting point for the conversation, not the end of it.
- Does this include the buyer's personal debt?
- No. A full underwriting review often runs a global cash flow analysis that adds the buyer's personal income and debt to the business figures above. This calculator checks the business alone, which is the number most borrowers can answer first.