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Debt Service Coverage Ratio – What It Is and How to Calculate It

original article by Priyanka Prakash, posted on Fit Small Business

When you apply for a small business loan, numbers can mean everything. For example, the lender will want to know your income, your credit score, and your Debt Service Coverage Ratio (DSCR).

DSCR measures your business’s ability to repay debt by dividing your net operating income by your total debt and interest payments. It is one of the main ways in which a lender evaluates the financial health of your business. Your DSCR can affect whether you get approved for a business loan, how much you qualify for, and the loan terms.

In the recent article on the Fit Small Business website, Dealstruck’s Vice President of Operations, Steve Freshour, goes into detail and provides easy to follow explanations and steps to follow to improve your DSCR since it will be considered by many lenders, traditional and alternative, when reviewing loan applications.

Debt Service Coverage Ratio is an important financial tool that lenders use to decide if you qualify for a business loan. Read the full article to learn all you need to know to get a handle on what it is and why it’s important.