Free founder tool
Debt service coverage ratio calculator
Calculate debt service coverage from EBITDA or available cash flow. See DSCR and headroom to your entered covenant minimum, free with no account or login.
| Measure | Result |
|---|---|
| Cash available for debt service | $700,000.00 |
| Scheduled debt service | $500,000.00 |
| DSCR | 1.40x |
| Headroom to minimum (DSCR minus minimum) | 0.15x |
| Cash headroom above required coverage | $75,000.00 |
Negative headroom means a shortfall against the minimum you entered. Results are rounded to two decimals and do not establish compliance.
These figures come from the numbers you enter. Vanward does not check or validate them. This is not lending, legal or tax advice. A credit agreement's own definitions control.
How the math works
DSCR = cash available for debt service / (scheduled principal + scheduled interest). Use the testing period required by your agreement. When starting from EBITDA, this illustration deducts unfinanced capex, cash taxes and distributions. When starting from cash flow already available for debt service, do not deduct those amounts again.
For example, $1,000,000 EBITDA less $100,000 unfinanced capex, $150,000 cash taxes and $50,000 distributions leaves $700,000. Scheduled principal of $400,000 plus interest of $100,000 totals $500,000. DSCR is 1.40x. Against a 1.25x minimum, ratio headroom is 0.15x and cash headroom is $75,000.
These are illustrative definitions. Some agreements use different deductions or a different numerator. Align the inputs with the signed agreement before interpreting the result.
Questions founders ask
- How is DSCR calculated?
- Divide cash available for debt service by scheduled principal plus interest for the same period. In EBITDA mode, this illustration first subtracts unfinanced capex, cash taxes and distributions. In cash flow mode, it uses your entered amount directly.
- What does headroom to the minimum mean?
- Ratio headroom is DSCR minus your entered minimum. Cash headroom is available cash minus the minimum multiplied by debt service. Negative headroom indicates a shortfall in this illustration, not a legal conclusion.
- What if scheduled debt service is zero?
- DSCR is undefined when principal plus interest is zero. Enter positive scheduled debt service to calculate a ratio. Negative cash available is allowed and produces a negative ratio.
- Does this determine covenant compliance?
- No. Your credit agreement controls the definitions, testing period, permitted adjustments and minimum. This calculator does not validate figures or determine compliance.
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