DSCR calculator for SBA loans: will your cash flow carry the payment?

What the number means

Debt service coverage compares two amounts: the cash a business produces in a year before it pays its lenders, and what those lenders are owed in the same year. Divide the first by the second.

At 1.00, every dollar of cash flow is already promised to a lender. At 1.42, the business earns $1.42 for each dollar it owes that year.

SBA's manual for lenders defines both halves.

• Cash flow is earnings before interest, taxes, depreciation and amortization, usually shortened to EBITDA. The lender may add to it or subtract from it, and must justify each change.
• Debt service is the principal and interest due on all of the business's debt, the new loan included.

The calculator opens on an example. A business shows a profit of $60,000 after deducting $12,000 of interest and $18,000 of depreciation. Add those two back and its cash flow is $90,000. It already pays $24,000 a year on other debt and wants $250,000 over ten years. At 9.75%, the median rate for a loan that size, the new payments are $3,269 a month, or $39,231 a year.

Coverage is $90,000 divided by $63,231: 1.42.

The minimum SBA sets

SBA does not leave the threshold to each lender. The rules that took effect on October 1, 2026 set a floor for each kind of loan.

Three things about that table.

It is a floor. A lender may ask for more than SBA does. SBA Express loans, unless they pay for the purchase of a business, have no number in the manual at all: the lender applies the credit standards it uses for its own loans of similar size, and must still show a reasonable assurance of repayment.

Collateral does not rescue weak cash flow. The manual tells lenders that cash flow is the primary source of repayment, not what they could recover by selling collateral, and that a request without reasonable assurance of repayment from cash flow must be declined whatever collateral is offered.

Buying a business is held to a higher standard. The 1.25 minimum is measured on what the business being bought actually earned, and the lender may not rely on forecasts to reach it. The one exception is a purchase built around a special-purpose property, such as a hotel, whose appraised value fully secures the loan.

How a lender builds the cash flow figure

The profit on a tax return is the starting point, not the answer. Under SBA's rules a lender:

• Works from the three most recent years of tax returns or financial statements plus a current interim statement. For a 7(a) Small loan, last year's statement is enough.
• Calculates EBITDA, then adjusts it. The manual lists the usual adjustments: capital spending the business must make but has not financed, income that will not recur, distributions to owners, distributions made so the owners of an S corporation can pay tax, rent, and the owner's draw.
• Asks for a schedule of every debt, including money owed to shareholders. For a 7(a) Small loan it also reads the last two months of bank statements to check that no debt was left off.
• Tests global coverage: the same sum again with any affiliated business included and, when a business is being bought, the buyers' own finances. It must come to at least 1.00.

When past results fall short, a standard loan can rest on two years of detailed projections. The lender has to explain why the projections deserve more weight than the history. Projected rent from the property being financed may not be counted.

The "adjustments" box in the calculator is for the items you already know about. The owner's draw is the one most often missed: money the owners take out is not there to pay the lender.

Why the rate matters as much as the amount

86% of the 7(a) loans approved in the twelve months to June 30, 2026 had a variable rate. Coverage calculated on the day of approval describes that day.

Rates can move a long way quickly. Prime stood at 3.25% until March 17, 2022. By July 27, 2023 it was 8.5%: 11 increases and 5.25 points in 16 months. A loan priced at prime plus a spread rose by the same 5.25 points.

Here is the example loan under higher rates.

The example survives all of them. Its cash flow could fall by $20,446, or 23%, before coverage reached SBA's minimum, and the rate would have to pass 19.9% to do the same on its own. A business that starts at 1.15 has none of that room. For it, one point of prime is the difference between meeting the test and missing it.

The table applies the new rate to the whole ten years. A real loan re-amortizes over the months that remain, so the change in payment is a little smaller late in the loan.

How much loan a cash flow supports

Run the arithmetic backwards and the cash flow sets a ceiling on the loan.

Term matters more than most borrowers expect. The same cash flow carries 2.4 times as much over 25 years as over 5, which is why real estate, with its long terms, supports much larger loans than equipment or working capital.

The $350,000 line matters too. The example's cash flow would carry $368,400 at the 1.10 minimum. But 1.10 only applies up to $350,000, and at the 1.15 required above it the same cash flow carries $345,800. So the most this business can borrow under SBA's minimums is $350,000. The calculator makes that adjustment for you.

What the calculator leaves out

• Your lender's own standard. SBA sets the floor. Ask the lender what ratio it requires and how it adjusts cash flow.
• Global coverage. The calculator looks at one business. The lender also counts affiliated businesses and, in a purchase, the buyers themselves.
• Taxes. EBITDA is measured before income tax. If the owners take distributions to pay tax on the business's profit, a lender will subtract them.
• The guaranty fee. If you add SBA's upfront fee to the loan, the balance and the payments are higher. The SBA loan calculator works that out.
• Seasons. A yearly ratio can hide months in which the payment is hard to make.

Coverage is a test of whether a loan can be repaid, not a promise that it will be. Of the 7(a) loans made between 2010 and 2019, 7.1% were charged off, and a lender had judged every one of them able to repay.

This page is general information. It is not an offer of credit, and we are not a lender.