Raise net operating income
- Raise rents to the current market
- Cut vacancy with better retention
- Add income: laundry, parking, storage
- Bill utilities back to tenants (RUBS)
- Appeal the property tax assessment
DSCR calculator, property and global.
Debt service coverage ratio is net operating income divided by annual debt service. Enter rent, vacancy, operating expenses, and the loan, and the calculator returns NOI, the payment, and the ratio against the 1.25x most lenders look for. Turn on global DSCR to fold in your own income and debts, which SBA lenders do on every loan they guarantee.
DSCR
calculator.
Annual figures for the property. Turn on global DSCR to add your own income and debts.
What DSCR
means.
Net operating income divided by annual debt service. Whether the property pays for itself, and by how much.
Net operating income is rent and other income, less vacancy, less operating expenses: taxes, insurance, management, repairs, utilities the owner pays. Debt service is the year's principal and interest. A property with $120,000 of NOI and $96,000 of annual payments has a DSCR of 1.25x, which means it earns $1.25 for every dollar it owes the lender. That extra quarter is the cushion against a vacant unit, a roof, or a rate reset.
| DSCR | What it says |
|---|---|
| Below 1.00 | The property loses money. Operations alone cannot cover the debt. |
| 1.00 | Break-even. Income exactly covers the payment, with no cushion. |
| 1.25 | The property earns $1.25 for every $1.00 of debt, a 25% cushion. |
| 1.40 and up | Strong. Some lenders offer better rates or more proceeds here. |
What lenders
require.
Most banks start at 1.20x to 1.25x. The SBA floor is 1.15x on standard 7(a) and 504 loans, 1.10x on 7(a) Small loans that are not business purchases, and 1.25x on most 7(a) business purchases.
The SBA's SOP 50 10 8.1 requires a minimum DSCR of 1.15x on standard 7(a) loans and 1.10x on 7(a) Small loans of $350,000 or less that are not business purchases, on historical or projected cash flow. SBA 504 loans need 1.15x on historical results. From October 1, 2026, a loan to buy a business (an initial acquisition or owner buyout) needs 1.25x on the last fiscal year or a two-year average, and projections no longer count. Those are the regulatory floors; most SBA lenders set their own bar at 1.25x, and the conservative ones want 1.50x. Banks lending on their own balance sheet tend to start at 1.25x. The ranges below are typical and vary by lender, market, and deal; confirm the number with the lender you plan to use.
| Lender type | Typical minimum | Notes |
|---|---|---|
| SBA 7(a) | 1.10x to 1.25x | SOP 50 10 8.1 floors: 1.15x standard, 1.10x on 7(a) Small loans, 1.25x on most business purchases; most lenders target 1.25x |
| SBA 504 | 1.20x to 1.25x | Owner-occupied real estate and equipment |
| Conventional bank | 1.25x to 1.35x | Higher for office, retail, and value-add |
| Agency small balance | 1.20x to 1.40x | Varies with market tier |
| Life insurance company | 1.25x to 1.35x | Conservative; prefers stabilized assets |
| CMBS | 1.25x to 1.40x | Debt yield is checked alongside DSCR |
| Bridge and hard money | 1.10x to 1.20x | Often underwritten on projected DSCR |
1.25x became the common bar because it covers about three months of vacancy before a payment is missed, absorbs a surprise repair without a default, and survives a modest rate increase at refinance.
Minimums by
property type.
The riskier the income, the bigger the cushion a lender wants.
| Property type | Typical minimum | Why |
|---|---|---|
| Multifamily, stabilized | 1.20x to 1.25x | Many tenants and steady housing demand |
| Industrial and warehouse | 1.20x to 1.25x | Long triple-net leases, light management |
| Retail, anchored | 1.25x to 1.30x | National credit tenants lower vacancy risk |
| Retail, unanchored | 1.30x to 1.40x | Higher turnover |
| Self-storage | 1.25x to 1.30x | Month-to-month tenancy, management heavy |
| Office, class A | 1.25x to 1.35x | Remote work effects vary by submarket |
| Office, class B and C | 1.30x to 1.40x | Higher vacancy, tenant improvement costs |
| Hotels | 1.35x to 1.50x | Seasonal and economic swings in income |
| Value-add and transitional | 1.35x and up | Underwritten on projected income |
Global
DSCR.
The property's cash flow and yours, combined.
Global DSCR adds your personal income to the property's NOI and your personal debt payments to the property's debt service, then divides. Lenders use it when you are the backstop: on any loan with a personal guarantee, the question is whether you could cover a shortfall from your own pocket. It tends to come up on:
- SBA 7(a) and 504 loans, which always carry a personal guarantee
- A first commercial purchase, where you have no track record
- Thin property coverage, anywhere near 1.00x to 1.15x
- Smaller balance loans, roughly under $5 million
- Any recourse loan, since the lender can come after you
Global DSCR uses the same lines a personal financial statement asks for: income, debts, and the payments on them. If you are running the global number for a lender, you already have what the statement needs. StatementsReady turns those inputs into a signed PDF or SBA Form 413 in about 8 minutes.
How to improve
your DSCR.
Raise the top of the fraction or shrink the bottom. Small moves on either side can carry a marginal deal over the line.
Lower annual debt service
- Bigger down payment, smaller loan
- Negotiate the rate or buy it down
- Longer amortization: 30 years beats 25 on payment
- Interest-only years lift the early ratio
- Seller financing, which often carries a lower rate
Garrett Pierson is the founder of StatementsReady and a licensed commercial real estate agent in Utah. He owns commercial property himself, so he fills out the same lender paperwork he writes about.
Common questions.
Still have a question?
Get in touch
What is a good DSCR for commercial real estate?
Most lenders want at least 1.25x, which leaves a 25% cushion for vacancy, repairs, or a rate reset. Above 1.40x is strong and can earn a better rate or a higher loan-to-value.
What DSCR does the SBA require?
SOP 50 10 8.1 requires a minimum DSCR of 1.15x on standard 7(a) loans and 1.10x on 7(a) Small loans of $350,000 or less that are not business purchases, on historical or projected cash flow. From October 1, 2026, most loans to buy a business need 1.25x on the last fiscal year or a two-year average (1.15x when an established company buys another in its own industry), and projections no longer count. Those are the floors; most SBA lenders set their own bar at 1.25x, and the SBA lets them count your personal income through a global DSCR when the business alone falls short.
What is global DSCR and why do lenders use it?
Global DSCR adds your personal income to the property's NOI and your personal debt payments to the property's debt service, then divides. Lenders use it on personally guaranteed loans because you are the backstop if the property has a bad year. It is the same data a personal financial statement asks for.
Does DSCR include income taxes or depreciation?
DSCR uses net operating income, which leaves out income taxes, depreciation, amortization, and capital expenditures. It measures whether the property's operating cash covers the payment.
Can I get a loan with a DSCR below 1.0?
Rarely from a bank, because the property is losing money. Bridge lenders will sometimes fund a property that is below 1.0 today on the strength of a projected DSCR after renovation, lease-up, or rent increases, at a higher rate and a shorter term.
How do higher interest rates affect DSCR?
A higher rate raises annual debt service with no change in income, so the ratio falls. A property that covered comfortably at a 4% rate can miss a 1.25x floor at 7%. Run both rates in the calculator to see the gap.
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