01
Formula
Ratio = net operating income ÷ annual debt service.
Cushion = income − debt service. The debt service coverage ratio calculator does not add taxes or a capex reserve unless you already took them out of the income.
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Debt service coverage ratio calculator
This debt service coverage ratio calculator divides net operating income by the annual debt service you enter. A result of 1.00 means the income you typed equals the debt service you typed. Dengaro does not set a minimum ratio and does not promise approval because a ratio clears a number you have in mind.
Coverage ratio
1.33
Income$120,000.00
Debt service$90,000.00
Cushion$30,000.00
Illustrative estimate only, not a financing offer. The rate is an assumption you set. Actual rates, terms and payments depend on a financing provider’s review.
How it works
The ratio is income divided by debt service.
One hundred twenty thousand dollars of net operating income and $90,000 of annual debt service is a ratio of 1.33. The cushion is $30,000. The income has to be the income you defined, for the same year as the debt service. A payment you are only illustrating is not a payment that has been offered. Principal and interest both belong in debt service if both are due. This page does not compute the payment. Use the amortization calculator if you need to turn a balance, a rate, and a term into a year's payments, then type that total here. Dengaro is a brand of Funding Routes LLC. It arranges equipment financing. It is not the lender. A ratio below 1.00 means the income you typed does not cover the debt service you typed — the difference is a shortfall, not a rounding issue. Ratios also move with the definition: net operating income, EBITDA, and taxable income can all produce a different result on the same business, so the number only means something next to its label. A seasonal business can also clear the annual ratio and still miss payments in slow months; an annual figure will not show that. What a reviewer does with the number — including whether one exists at all — is outside the scope of this page.
02
Example
$120,000 of income and $90,000 of debt service.
The ratio is 1.33 and the cushion is $30,000. Change either input and the ratio moves. Nothing on the page says 1.33 is acceptable. That judgment is not Dengaro's.
03
Tips
Match the year and the definition.
Income before debt, not after, is the usual numerator. If you already subtracted the payment, the ratio is meaningless. Say which earnings figure you used when you share the result.
04
Equipment
An equipment payment can be the debt service you are studying.
Type the illustrated annual payments if that is the question. Dengaro does not promise the payment, the rate, or an approval. The application does not receive this ratio.
Important questions
Know what to expect.
What ratio is required?+
Dengaro does not publish one. This debt service coverage ratio calculator only divides. A provider, if any, sets its own review. A ratio is not an approval.
Should the numerator be revenue?+
Use net operating income, or whatever figure you have defined and labeled. Revenue that still has operating costs in it will overstate the ratio.
Does this build the payment?+
No. Enter the annual total of the payments you are illustrating. The amortization and interest calculators can help you build that total.
Is the cushion cash?+
It is income minus debt service on the definitions you used. It is not the cash flow calculator's ending bank balance.
What does a ratio below 1.00 mean?+
The income you typed is smaller than the annual debt service you typed. The page reports it without a verdict — whether that is a problem, and whose problem, is a reviewer's question, not this calculator's.
Can I use monthly numbers?+
Only if both inputs are monthly. The ratio is unitless — income divided by debt service — so mismatched periods are the common error. Multiply a monthly payment by twelve before comparing it to annual income.
Financing built into the sale