Debt Service Coverage
A ratio of cash flow available to the principal and interest payments the acquisition loan will require.
Last updated September 5, 2026
Debt service coverage ratio (DSCR) is typically recurring cash flow divided by annual principal and interest. Lenders set a minimum (often around 1.25x on SBA files, though the exact test varies) after a reasonable owner wage. A deal that looks cheap on a multiple can still fail DSCR if the loan is large, the rate is high, or add-backs do not hold. Model rent, royalties, and a replacement manager before you trust the ratio.