Acquidex · Tool · Calculator · SBA Underwriting
DSCR Calculator · v1.0
Updated 2026-05-09
Debt service coverage, computed the way SBA lenders do.
Lender-adjusted DSCR — adjusted SDE minus operator compensation minus capex reserve, over annual debt service. Bands map to SBA SOP minimum (1.15×), lender-preferred floor (1.25×), and healthy buffer (1.50×+).
§ 01 · Engine
Run your DSCR.
Coverage Inputs
Lender-Adjusted DSCR
Use lender-adjusted SDE — strip non-recurring add-backs, restore replacement-labor cost for absentee-owner cases.
What you (or a hired GM) need to earn to live. SBA lenders subtract this from SDE before computing DSCR.
Annual reserve for replacement equipment, vehicles, and working-capital truing. Often missed; always required.
Total annual P&I across all amortizing acquisition debt — SBA loan plus any non-standby seller note. Compute it here →
DSCR
1.78×
A · Healthy
DSCR = (Adjusted SDE − Operator comp − CapEx reserve) ÷ Annual debt service. Most SBA lenders underwrite to ≥ 1.25×; the SOP global floor is 1.15×.
DSCR bands
- ≥ 1.50× — healthy buffer for rate shocks and revenue dips
- 1.35–1.49× — comfortable, most lenders happy
- 1.25–1.34× — lender-preferred floor
- 1.15–1.24× — SBA SOP minimum, fragile
- < 1.15× — fails SBA underwriting
§ 02 · Read
How to read your DSCR.
Principal read
DSCR = (Adjusted SDE − Operator comp − CapEx reserve) ÷ Annual debt service. Most published DSCR formulas omit the operator-pay and capex haircut. SBA lenders don't.
Further reads
- 02
Why your "clean" SDE may not clear
Reported SDE includes seller-prepared add-backs that lenders will strip — personal expenses, one-time items, absentee-owner labor cost. Lender-adjusted SDE is typically 10–25% lower than CIM-presented SDE.
- 03
Stress-test before you sign the LOI
A base-case DSCR of 1.30× looks comfortable until you stress for +200 bps rate shock and a 15% revenue dip. Many deals that clear on paper fall below 1.15× under stress — which is where deals fail in year two.
- 04
What to change if DSCR is thin
Lower the price, increase the equity injection, put a portion of the seller note on full standby for 24 months, or extend amortization (10 → 15 years for equipment-heavy deals). Don't assume growth will fix coverage.