Tools / DSCR calculator
DSCR calculator
Debt service coverage is the number the loan committee actually votes on. Check yours against the SBA floor (1.15x through Sep 30, 2026) and the SOP 50 10 8.1 acquisition floor (1.25x from Oct 1, 2026).
Cash flow
Debt service
CFADS $265,600 / debt service $152,011
How the ratio is built
Floors from our rate file as of August 13, 2026: 1.15x SBA floor through September 30, 2026; 1.25x for acquisitions under SOP 50 10 8.1 from October 1, 2026, on historical numbers. Lender overlays can sit above SBA floors; estimates only.
What DSCR is
DSCR divides the cash the business generates for its lender (CFADS, cash flow available for debt service) by the annual payments on the acquisition debt. A DSCR of 1.25x means the business earns $1.25 for every $1.00 of loan payments. Our rate file (as of August 13, 2026) carries both regimes: 1.15x, the SBA floor through September 30, 2026, and 1.25x, the SOP 50 10 8.1 floor for Initial Acquisition, Owner Buyout, and ESOP deals from October 1, 2026 (Business Expansion stays at 1.15x). The 8.1 floors are measured on historical numbers; the lender must review projections but may not rely on them to clear the floor.
What lenders count in CFADS
Lenders start from your cash flow figure and normalize it for the world after closing:
- New owner compensation comes out. SDE includes the seller's full pay, so a realistic salary for you (or a manager), grossed up for payroll taxes and benefits, is deducted. This calculator applies the same 12% load as our deal analyzer.
- Documented changes count, both ways. Rent that goes away because you are buying the building, departing-owner costs, a lease that steps up after closing. Only adjustments you can paper get credit.
- All acquisition debt goes in the denominator. The SBA payment plus the seller note plus anything else signed for the deal.
Why year-1 structure matters
Coverage is tightest in the first year, before growth and before any seller-note step-downs. A seller note that is interest-only for the first year or two lowers year-1 debt service and can move a deal from below the bank target to above it, which is exactly the kind of structure lever the Deal Analyzer lets you test. Longer amortization on the SBA loan works the same way: the payment drops, coverage rises, and the trade is more total interest.
Frequently asked questions
What DSCR do I need for an SBA loan?
Through September 30, 2026, the SBA program minimum is 1.15x. From October 1, 2026, SOP 50 10 8.1 sets the floor at 1.25x for Initial Acquisition, Owner Buyout, and ESOP deals, and 1.15x for Business Expansion, met on historical numbers rather than projections. Individual lenders can hold overlays above SBA's floors. Treat the floor as the line where a deal stops being possible, not where it becomes comfortable.
Should I use SDE or EBITDA?
For owner-operated small businesses, brokers quote SDE, which includes the owner's full compensation; deduct your replacement salary from it. EBITDA already assumes a market-rate manager, so if your figure is a true EBITDA you may set the salary field to zero rather than double-count.
Does the seller note count as debt service?
Yes, unless it is on full standby (no payments for the loan term). A standby note is treated as quasi-equity; a note with payments, including interest-only payments, belongs in the denominator.
My DSCR is below target. What moves it?
In rough order of impact: a lower price, a bigger or standby seller note, longer amortization, an interest-only period on the seller note, or documented cash flow adjustments you have not yet credited. The headroom figure shows how many dollars of annual debt service you are away from the bank target.