What DSCR measures
Debt Service Coverage Ratio compares your business's operating cash flow to its total debt payments — existing plus any new loan you're proposing. It answers a simple question: for every rupee of debt payment due, how many rupees of operating income do you have to cover it? A DSCR of 1.0 means income exactly covers debt payments, with nothing left over; higher is safer.
How this calculator works
Total annual debt service = Existing annual debt service + Proposed annual debt service.
DSCR = Annual EBITDA ÷ Total annual debt service.
A worked example
A business with ₹40,00,000 annual EBITDA, ₹8,00,000 in existing annual debt service, proposing a ₹1,00,00,000 loan at 11% p.a. over 7 years:
The proposed EMI is about ₹1,71,224/month, or roughly ₹20,54,692 a year. Combined with the existing ₹8,00,000, total annual debt service comes to about ₹28,54,692 — giving a DSCR of roughly 1.40, in the "acceptable" range below.
General reference ranges
These are commonly cited illustrative bands, not a universal or regulatory standard — every lender sets its own policy:
| DSCR | General read |
|---|---|
| 1.5 and above | Comfortable cushion over debt obligations |
| 1.2 to 1.5 | Acceptable to many lenders, limited cushion |
| 1.0 to 1.2 | Tight — income barely covers obligations |
| Below 1.0 | Income does not cover debt payments from operations alone |
What lenders look at beyond DSCR
DSCR is a starting point, not the whole underwriting picture. Indian lenders assessing MSME and business loans typically also weigh: business vintage and stability, GST returns and ITR filings as income proof, banking transaction history, available collateral, the promoter's personal and business credit bureau history, and industry-specific risk. A strong DSCR helps, but doesn't substitute for the rest.