How to Calculate DSCR from Bank Statements (With Examples)

What Is DSCR?

Debt Service Coverage Ratio (DSCR) measures a business's ability to repay its debt obligations from operating cash flow. It's the single most important metric for business lenders when evaluating a loan application.

DSCR = Net Operating Income ÷ Total Debt Service

A DSCR of 1.0 means the business generates exactly enough cash to cover its debt payments. Most lenders require a minimum DSCR of 1.25, meaning the business generates 25% more cash than needed to service all debt.

Calculating DSCR from Bank Statements

Bank statements provide the most accurate DSCR calculation for cash-basis businesses:

1. Calculate average monthly deposits (gross revenue): Sum all qualifying income deposits and divide by number of months
2. Calculate average monthly withdrawals (operating expenses): Sum all operating expense payments and divide by number of months
3. Calculate Net Operating Cash Flow: Deposits minus withdrawals (excluding the proposed new debt payment)
4. Identify total debt service: All existing loan payments plus proposed new payment
5. Calculate DSCR: Net Operating Cash Flow ÷ Total Debt Service

DSCR Example Calculation

Business with 3-month bank statements:

• Average monthly deposits: $45,000
• Average monthly operating expenses: $32,000
• Existing MCA payment (daily): $150 × 22 days = $3,300/month
• Existing equipment loan: $800/month
• Proposed new loan payment: $2,500/month

Net Operating Cash Flow = $45,000 - $32,000 = $13,000

Total Debt Service = $3,300 + $800 + $2,500 = $6,600

DSCR = $13,000 ÷ $6,600 = 1.97

At 1.97x, this business has nearly twice the cash needed to service its debt — a strong application.

DSCR Benchmarks by Loan Type

• SBA loans: Typically require 1.25x minimum
• Conventional business loans: Usually 1.25-1.5x
• Commercial real estate: Often 1.25x for the property alone
• Equipment financing: Sometimes 1.1x acceptable for strong collateral
• Merchant cash advances: Often no formal DSCR requirement (which is why they're so risky)

What Happens Below 1.0 DSCR?

A DSCR below 1.0 means the business doesn't generate enough cash to service its current debt — let alone new debt. This is an automatic decline for most lenders unless there are very strong compensating factors (excellent collateral, guarantor with strong personal income, etc.).

Automated DSCR Analysis

StatementScrub calculates all the components needed for DSCR analysis from bank statements automatically — average monthly deposits, withdrawals, and existing debt service payments — giving lenders everything needed to complete the DSCR calculation in seconds.