Debt service coverage calculator
Short answer
With $90,000 of EBITDA and $42,000 of current debt payments, a $150,000 loan at 13.00% brings coverage to 1.31:1. SBA's minimum is 1.15:1 on a Standard 7(a) loan (SOP 50 10 8.1, Sec. B, Ch. 1, Para. C).
Your cash flow, last full year
Your debt
Coverage of 1.31:1 clears 1.15:1 with $10,793 of yearly cash flow to spare.
Estimates only. This is not a credit decision. Your lender decides how to count cash flow and what coverage it needs. The rate starts at SBA's maximum for the size until you change it. The math runs in your browser, and we do not save what you enter.
Next step
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Start my loan requestJanover Capital LLC is not a lender and is not the SBA. The lender makes the credit decision. A lender or marketplace may pay us a referral fee if we connect you, at no cost to you. Advertiser disclosure.
How this is computed
SOP 50 10 8.1 measures coverage as operating cash flow divided by debt service. Operating cash flow is EBITDA, with additions and subtractions the lender can justify. Debt service is the future required principal and interest on all business debt, including the new SBA loan (Sec. B, Ch. 2, Para. C.2.a; Sec. B, Ch. 1, Para. C).
EBITDA = net income + interest + taxes + depreciation and amortization
coverage = (EBITDA + adjustments) / yearly debt paymentsThe largest new loan is the amount whose yearly payment uses up the cash left after current debts, at the coverage you chose. It uses the rate and term you entered.
SOP 50 10 8.1 sets these minimums. Lender policies can be tighter.
| Loan | Minimum coverage | Source |
|---|---|---|
| 7(a) Small, other than a change of ownership | 1.10:1 | Sec. B, Ch. 2, Para. C.2.a |
| Standard 7(a) | 1.15:1 | Sec. B, Ch. 1, Para. C |
| SBA Express, other than a change of ownership | No fixed ratio. The lender must show reasonable assurance of repayment. | Sec. B, Ch. 2, Para. C.2.b.iii |
| Change of ownership: initial acquisition or owner buyout | 1.25:1 | App. 15, Para. C.2.b |
| Change of ownership: business expansion | 1.15:1 | App. 15, Para. C.2.b |
A worked example
Take a business with $58,000 of net income, $9,000 of interest expense, $6,000 of income taxes and $17,000 of depreciation and amortizationPaying a loan down on a schedule, so each payment covers interest and part of the balance. Full definition. That is $90,000 of EBITDA. It pays $42,000 a year on current debt. It wants a $150,000 loan over 120 months at SBA's maximum rate for that size, 13.00% today. These figures are an illustration, not a quote.
| Item | Amount |
|---|---|
| Operating cash flow (EBITDA) | $90,000 |
| Yearly payment on the new loan | $26,876 |
| Total yearly debt payments | $68,876 |
| Coverage today | 2.14:1 |
| Coverage with the new loan | 1.31:1 |
| Largest new loan at 1.15:1 | $202,379 |
What this does not tell you
This tool measures cash flow. It does not estimate whether a lender will approve a loan. A Standard 7(a) loan also needs 1:1 coverage on a global basis (Sec. B, Ch. 1, Para. C), and a lender can adjust the cash flow you enter.
Common questions
What counts as debt service?
The future required principal and interest on all business debt, including the new SBA loan (SOP 50 10 8.1, Sec. B, Ch. 2, Para. C.2.a).
Is EBITDA the same as net income?
No. EBITDA adds interest, taxes, depreciation and amortization back to net income. A lender can also adjust it for items such as owner's draw, unfunded capital expenditures and rent (SOP 50 10 8.1, Sec. B, Ch. 1, Para. C.2.a).
What if my coverage is below the minimum?
On a Standard 7(a) loan, the lender must look at 2 years of detailed projections when history falls short (SOP 50 10 8.1, Sec. B, Ch. 1, Para. C.2.a). A smaller loan or a longer term also lifts the ratio.
Does SBA Express have a minimum ratio?
Not for most SBA Express loans. The credit analysis must show a reasonable assurance of repayment, and the lender's own standards apply (Sec. B, Ch. 2, Para. C.2.b.iii). Read the SBA Express rule.
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<p><a href="https://www.sbaexpress.loans/tools/debt-service-coverage/">Debt service coverage calculator</a> from SBA Express Loans</p>Ask a lending partner about this loan
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Janover Capital LLC is not a lender and is not the SBA. The lender makes the credit decision. A lender or marketplace may pay us a referral fee if we connect you, at no cost to you. Advertiser disclosure.