About the DSCR
This DSCR calculator measures your Debt Service Coverage Ratio — the number of times your yearly cash earnings cover your yearly loan repayments. Enter annual net profit, depreciation, interest already paid and the proposed monthly EMI, and the tool returns the ratio, the cash accrual, the annual debt service and a plain-language verdict on how a banker is likely to read it.
It is designed for MSME owners and startups preparing a term-loan application, and for accountants and consultants drafting a project report or CMA data. Checking the ratio before you apply tells you whether the loan amount and tenure you have in mind are realistic, or whether the proposal needs to be reshaped first.
The ratio rises with profit and with non-cash charges such as depreciation, and falls as the EMI grows. The tool rates a DSCR below 1 as unserviceable, 1 to 1.25 as a thin margin, 1.25 to 1.5 as acceptable and 1.5 or more as comfortable. Lenders set their own benchmarks and may compute the ratio slightly differently.
How to use it
- 1Enter your annual net profit and annual depreciation from the latest profit and loss account.
- 2Enter the interest you already pay in a year on existing loans.
- 3Enter the proposed monthly EMI; if you service other term loans, add their monthly instalments to this figure.
- 4Read the DSCR, cash accrual and annual debt service, and note the verdict band.
How this is calculated
DSCR = (annual net profit + annual depreciation + annual interest) ÷ annual debt service. Annual debt service = monthly EMI × 12. Depreciation is added back because it is a non-cash expense; interest is added back because the EMI in the denominator already includes interest. Bands used by the tool: below 1.00 = not serviceable; 1.00 to 1.24 = thin margin; 1.25 to 1.49 = acceptable; 1.50 and above = comfortable.
Frequently asked questions
What is DSCR and why do banks check it?
DSCR, or Debt Service Coverage Ratio, compares the cash your business generates in a year with the loan instalments due in that year. A ratio of 1.5 means you earn ₹1.50 for every ₹1 of repayment. Lenders use it to judge whether a term loan can be repaid from business cash flow rather than from collateral.
What is a good DSCR for a business loan?
This tool treats 1.25 and above as bankable and 1.5 and above as comfortable. A ratio between 1 and 1.25 is a thin margin, and anything below 1 means the instalments exceed your cash accrual. These bands are a general guide; each lender sets its own minimum and may ask for a higher ratio in riskier sectors.
How does this DSCR calculator compute the ratio?
It adds annual net profit, depreciation and interest to arrive at cash accrual, multiplies the monthly EMI by twelve to get annual debt service, and divides the first by the second. Banks computing DSCR for a project report usually do this year by year on projected figures and then look at the average.
Why are depreciation and interest added back to profit?
Depreciation reduces accounting profit but does not take cash out of the business, so it is added back. Interest is added back because the instalments in the denominator already contain interest; leaving it deducted from profit as well would count the same cost twice and understate your repayment capacity.
I already have other loans. How should I include them?
The tool's debt service is simply the monthly EMI you enter multiplied by twelve. To reflect all your obligations, add the monthly instalments of your existing term loans to the proposed EMI and enter the combined figure. Keep the interest on those existing loans in the interest field so that the two sides stay consistent.
How can I improve a low DSCR?
Reduce the loan amount, ask for a longer tenure so that the EMI falls, bring in more of your own capital, or close expensive existing debt before applying. Improving margins and reporting all income properly in your returns also helps, because lenders rely on reported profit rather than on informal estimates.