DSCR measures whether your operation earns enough to cover its loan payments, with some room to spare.
The debt-service coverage ratio is income available for debt service divided by total debt payments; a value above 1.0 indicates income exceeds those payments.
Lenders rely heavily on DSCR to judge repayment ability. A cushion above 1.0 is generally preferred, though required levels vary by lender.
$120,000 available for debt service against $100,000 of payments is a DSCR of 1.2.
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