Glossary · Reading the business
DSCR(debt service coverage ratio)
In short
Yearly cash flow divided by yearly loan payments. 1.25x means $1.25 of cash for every $1 of payments. Lenders want 1.1x minimum, 1.25x to get comfortable.
What it means in a deal
DSCR is the single most important number in your underwriting. Lenders divide the business's annual cash flow — after paying you a market-rate salary — by the total annual debt service on the SBA loan plus any other obligations. The SBA requires at least 1.0x globally, but most lenders want 1.25x or better to approve with confidence. A DSCR below 1.0x means the business literally can't cover its debt from operations, which is a hard stop.
Related terms
Common questions about DSCR
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-16 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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