DSCR Calculator
Eligibility decides whether your file gets read. This ratio decides how much you get. It is computed from your profit rather than your turnover, which is why owners with strong sales are declined and never find out why.
Your figures
Take these from your last filed profit and loss account. A lender will read the same document.
The loan you want
Well clear of any lender threshold. You have room to borrow more if the business needs it.
Thin line is where you are now at 3.08. Thick line is where this loan takes you.
The business supports this comfortably. You could go to Rs.42.8 L on the same tenure before DSCR falls to the 1.25 floor. That does not mean you should. It means the servicing test is not your binding constraint.
KarobarUdhar Insider Tip
Depreciation is why a business showing modest profit can still service substantial debt. It is a book charge, not a payment, so it stays in the business as cash and lenders add it back. An owner whose accountant has been maximising depreciation to reduce tax often has a far stronger DSCR than the profit line suggests, and does not realise it. If your profit looks thin, check what depreciation is doing to it before assuming you cannot borrow.
KarobarUdhar Insider Tip
Tenure is the quietest lever on this ratio. Stretching the same loan from three years to five cuts the annual debt service by roughly a third and can move a borderline file into acceptable territory without changing a rupee of the amount. It costs more interest overall, so it is a trade rather than a trick, but when the alternative is a decline it is usually the better trade. Ask for the longer tenure before you ask for less money.
Indicative only. Cash available for debt service is taken as profit after tax plus depreciation, other non-cash charges and interest on existing debt. Lenders vary in what they add back, some work from EBITDA, and some assess projected rather than historical figures. The 1.25 floor is common practice, not a rule. Your lender's own credit policy decides the outcome.
The test that sizes your sanction
Debt service coverage ratio asks one question: for every rupee the business owes each year, how many rupees of cash does it generate to pay with. At 1.0 the business exactly covers its obligations and has nothing left for a bad quarter. At 1.25, the level most lenders look for, there is a quarter of a rupee of cushion for every rupee owed.
The reason this matters more than turnover is that turnover is not cash. A business can grow sales sharply, tie the proceeds up in stock and receivables, and generate less cash than the year before. The credit officer sees that immediately in the ratio, and no amount of discussion about the order book will move it.
Two things improve the ratio without changing the business. Adding depreciation back, which lenders do because it is a book charge rather than a payment. And lengthening tenure, which reduces annual debt service without touching the amount borrowed. Between them they turn a surprising number of borderline files into approvable ones.
How to use it
- Take the figures from your filed accounts. Profit after tax and depreciation from your last profit and loss account. Your lender will read the same document, so use the same numbers.
- Split existing debt into interest and principal. Both are part of debt service, but only interest is added back to cash. Your loan statements show the split.
- Enter the loan you want. Amount, rate and tenure. Change the tenure and watch the ratio move before you change the amount.
- Read the maximum, not just the verdict. The tool shows the largest loan that keeps you above the floor. If it is below what you asked for, apply for that instead.
Common questions
What is a good DSCR for a business loan?
Most lenders want 1.25 or better after the new loan is included. Below about 1.1 a decline is near certain. Above 1.5 you are comfortable and the servicing test is not what is holding your application back. These are common practice rather than a rule, and individual credit policies differ.
Why does depreciation get added back?
Because it is a book charge, not a payment. Depreciation reduces your reported profit but the cash stays in the business, so it is available to service debt. This is why a business showing modest profit can still support substantial borrowing, and why an owner whose accountant has maximised depreciation for tax reasons often has a stronger position than the profit line suggests.
My turnover is strong. Why was my loan cut back?
Turnover decides whether your file gets read. Servicing decides the amount. A lender computes how much of your cash is already committed to existing debt and caps the new loan against what remains. Strong turnover with heavy existing EMIs produces a weak ratio, and the ratio is what sizes the sanction.
Can a longer tenure fix a weak DSCR?
Yes, and it is the most overlooked option. Stretching a loan from three years to five cuts the annual debt service by roughly a third without changing the amount, which can move a borderline file into acceptable territory. It costs more interest in total, so it is a trade rather than a trick, but when the alternative is a decline it is usually worth making.
Do all lenders calculate DSCR the same way?
No. Some work from profit after tax with depreciation and interest added back, as this calculator does. Others start from EBITDA. Some assess projected figures rather than historical ones, particularly for expansion proposals. Ask your lender which basis they use, because the same business can produce noticeably different ratios under each.