DSCR calculator: debt-service coverage ratio
Debt-service coverage ratio is normalised EBITDA divided by total annual debt service, including the proposed new loan. UK SMB term lenders want 1.25 or above for clean credit, 1.10 or above once stressed, and decline below 1.0. Enter your EBITDA, existing debt service and the new repayment to see your DSCR, a stressed DSCR and which lender band you land in.
Director, FundBiz
Oliver leads FundBiz's specialty finance comparison and matching engine. With a background in UK commercial finance, he oversees lender partnerships, eligibility logic and post-decline routing.
Last reviewed: 29 June 2026
Work out your DSCR
- Total annual debt service
- £140,000
- DSCR
- 1.29
- Stressed DSCR
- 1.09
- Headroom over debt service
- 29%
- Lender band
- Mainstream floor met
Illustrative. Lenders calculate DSCR at the borrower level on filed accounts and run their own stress tests; treat this as a sanity check, not an underwriting decision.
The maths in plain English
The formula is simple. The quality is in the inputs.
- Numerator: normalised EBITDA. Profit before tax plus interest, depreciation and amortisation, from the latest filed Ltd or LLP accounts. Then normalise: add back one-off costs, add back owner remuneration above market, and strip out revenue that will not recur.
- Denominator: total annual debt service. Every committed repayment over the next 12 months. Existing term-loan and asset-finance instalments, owner-occupier mortgage interest, serviced director loans, plus the proposed new loan.
- Divide. EBITDA over debt service. 1.0 means EBITDA covers debt service exactly; 1.25 means it exceeds it by 25%; 2.0 means EBITDA is twice debt service.
- Stress. Apply a revenue haircut to EBITDA and recalculate. A typical lender bar is 1.25 normally and 1.10 stressed.
The most common cause of a calculated DSCR landing above the lender-calculated DSCR is missed debt service: unreported MCAs, asset-finance contracts in trading names, and director loans serviced from the company. Count all of it.
Worked examples
| EBITDA | Debt service | DSCR | Stressed (15%) | Band |
|---|---|---|---|---|
| £180,000 | £180,000 | 1.00 | 0.85 | Specialist / post-decline routes |
| £180,000 | £140,000 | 1.29 | 1.09 | Mainstream floor met |
| £225,000 | £150,000 | 1.50 | 1.27 | Competitive-pricing band |
| £400,000 | £200,000 | 2.00 | 1.70 | Cleanest underwriting band |
At 1.0 the business covers debt service exactly with nothing left for tax, dividends or a rate rise, so mainstream lenders decline. 1.25 is the standard clean-credit floor; 1.5 is where lenders compete on price; 2.0 puts you inside the cleanest band.
| Normalised EBITDA | Total annual debt service | DSCR | Stressed DSCR (15% haircut) | Headroom | Lender band |
|---|---|---|---|---|---|
| £180,000 | £180,000 | 1.00 | 0.85 | 0% | Below 1.0: automatic decline |
| £180,000 | £140,000 | 1.29 | 1.09 | 29% | Mainstream floor met |
| £225,000 | £150,000 | 1.50 | 1.27 | 50% | Competitive-pricing band |
| £400,000 | £200,000 | 2.00 | 1.70 | 100% | Cleanest underwriting band |
Source: FundBiz DSCR worked examples
DSCR = normalised EBITDA / total annual debt service (existing committed repayments plus the proposed new loan). Stressed DSCR applies a 15% revenue haircut to EBITDA over the same debt service. Illustrative; lenders use filed accounts and their own stress parameters.
View as plain-text Markdown
### Worked examples: DSCR from normalised EBITDA and total annual debt service (UK SMB term loans) | Normalised EBITDA | Total annual debt service | DSCR | Stressed DSCR (15% haircut) | Headroom | Lender band | | --- | --- | --- | --- | --- | --- | | £180,000 | £180,000 | 1.00 | 0.85 | 0% | Below 1.0: automatic decline | | £180,000 | £140,000 | 1.29 | 1.09 | 29% | Mainstream floor met | | £225,000 | £150,000 | 1.50 | 1.27 | 50% | Competitive-pricing band | | £400,000 | £200,000 | 2.00 | 1.70 | 100% | Cleanest underwriting band | Source: FundBiz DSCR worked examples DSCR = normalised EBITDA / total annual debt service (existing committed repayments plus the proposed new loan). Stressed DSCR applies a 15% revenue haircut to EBITDA over the same debt service. Illustrative; lenders use filed accounts and their own stress parameters.
“A 1.5 annual DSCR can hide a seasonal business that fails the lowest-quarter test, and that is where I see clean-looking applications stall. Lenders for hospitality, retail and agricultural clients often run a separate lowest-quarter DSCR and want a higher annual figure or an overdraft alongside the term loan. The other quiet killer is hidden debt service: an MCA in a trading name or a serviced director loan that the applicant left out lifts the real denominator and drops the lender's DSCR below the floor at offer stage.”
FAQ
What DSCR do UK lenders want to see?
Most UK SMB term lenders set 1.25 as the floor for clean-credit applicants. Asset-backed and commercial-mortgage lenders often want 1.30 to 1.50 over a stress-tested rate. Specialist post-decline lenders accept 1.10 to 1.20 at higher pricing. Below 1.0 is an automatic decline because the cashflow does not cover the proposed debt service.
EBITDA or operating cashflow in the numerator?
Mainstream UK SMB lenders use EBITDA or normalised EBITDA. Larger commercial-mortgage and asset-backed lenders move to operating or free cashflow because it captures working-capital movement. The number changes materially between EBITDA and free cashflow for businesses with growing receivables.
Total debt service or proposed debt service only?
Total. The denominator must include every existing committed repayment plus the proposed new repayment. Hidden facilities, such as unreported MCAs, asset-finance contracts in trading names and serviced director loans, are the most common reason a calculated DSCR lands above the lender-calculated DSCR at offer stage.
How do I improve DSCR before applying?
Three levers. Raise normalised EBITDA by reversing one-off costs and trimming owner remuneration above market. Lower total debt service by refinancing short-term debt onto longer terms or settling small expensive balances first. Lengthen the proposed term, since a longer term lowers monthly debt service and lifts DSCR mechanically.
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Last reviewed: 29 June 2026.