Debt service coverage


Also found in: Acronyms.

Debt service coverage

The ratio of cash flow available to the borrower to the annual interest and principal payments on a loan or other debt.

Debt-Service Coverage Ratio

1. In investment real estate, the ratio of annual net operating income on a piece of investment property to its annual debt service. Banks use the DSCR to help determine whether to make or refinance loans for investment property. A DSCR equal to or greater than 1 indicates that the debtor is able to service the debt on the income from the investment property. In personal finance, banks usually require a DSCR of at least 1 to make such a loan, while they generally expect a ratio of 1.2 for commercial projects.

2. In government finance, the ratio of annual export earnings to its annual debt service on external debt.
References in periodicals archive ?
72 percent, was written for a term of 10 years with a 25-year amortization, and delivers debt service coverage of 1.