General
What is DSCR and why does it matter?
Written by
Alex Morgan · Head of Credit
Reviewed by
Betty Francis · Chief Compliance Officer
Last reviewed
June 12, 2026
Short Answer
Debt Service Coverage Ratio (DSCR) = Net Operating Income ÷ Annual Debt Service. Lenders require 1.20x or higher; Inflection Financing typically requires 1.25x for SBA.
Detail
DSCR measures whether your cash flow can comfortably service proposed debt payments. A DSCR of 1.25x means you generate $1.25 of cash for every $1.00 of debt service — a 25% cushion. Below 1.20x, most lenders decline. Above 1.50x, you have meaningful flexibility on loan size and term. The most common reason creditworthy borrowers get declined is a tight DSCR — usually fixable by either reducing requested loan size, extending amortization, or showing add-backs.
Key facts
- Formula: NOI ÷ Annual Debt Service
- Inflection Financing SBA minimum: 1.25x
- Bridge minimum: 1.10x with strong exit
- Improve by: adding back one-time expenses, owner comp, depreciation
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