Use this
to estimate your debt service coverage on new commercial loans and mortgages. If your debt service coverage is greater than 1.25, including your new loan payment, you have a good chance of being approved. Anyone considering obtaining a commercial loan, either for a small business, for acquiring commercial real estate, or for major capital expenditure, would benefit from knowing their debt service coverage and their likelihood of being approved.
Loan amount - Total amount of your
Amortization - Payment period in years.
Interest rate - Annual interest rate for this commercial loan. Interest is calculated monthly on the current outstanding balance of your loan at 1/12 of the annual rate.
New monthly payment - Monthly payment for this commercial loan.
Annual Verifiable net income - Your annual net income from IRS tax returns or other financial statements.
Annual depreciation expense - Since depreciation reduces your net income, but not your cash flow, we add back depreciation in calculating your total net cash income.
Other non-cash charges - Like depreciation, these are other non-cash charges to your net income that should be added back to calculate your total net cash income for the year.
Real estate mortgage - Your monthly payment for any real estate mortgages.
Business line of credit - Your monthly payment for any business lines of credit.
Auto loans - Your monthly payment for any auto loans.
Credit cards - Your monthly payment for any credit cards.
Other loans - Your monthly payment for any other outstanding loans.
Monthly debt payments eliminated - Enter the amount, if any, of the monthly obligations you entered above that will be paid off by this new commercial loan.
Debt Service Coverage (DSC) - The Debt Service Coverage (DSC) is determined by dividing the total annual net cash income by the total annual debt service. If you have a DSC of 1.25 or higher, there is a good chance that you will be approved for your commercial loan.