Free DSCR & Commercial Loan Underwriting Calculator

Step 1: Net Operating Income, Loan Terms & Covenant Thresholds

Commercial Loan Underwriting Parameters

🏢 Operating Cash Flow & Fixed Charges

Annual NOI / CFADS ($)

Target DSCR Covenant (x)

Annual Capex Reserve ($)

Annual Operating Lease ($)

💳 Senior Debt Facility Structure

Requested Loan Amount ($)

Annual Interest Rate (%)

Amortization Term (Years)

Standard monthly compounding amortization.

Debt Service Coverage (DSCR)

1.35x

Passes 1.25x Bank Covenant

Fixed Charge Coverage (FCCR)

1.28x

After $35K Capex & $0 Leases

Max Supported Loan Capacity

$7,025,000

+$525,000 vs. Requested Loan

Debt Yield

10.00%

NOI $650K / Debt $6.5M

Underwriting Stress Test: DSCR & Max Loan vs. Interest Rate & NOI Shocks

Simulates DSCR multiple (x) and Maximum Supported Loan Amount ($) across benchmark lending interest rates and property revenue contractions (-20% to +20%).

Interest Rate Tier	-20% NOI Shock	-10% NOI Shock	Baseline NOI	+10% NOI Expansion	+20% NOI Expansion

Commercial Lending Principles

Understanding DSCR & Debt Capacity

Key credit risk concepts from commercial banking & RMA lending standards:

Net Operating Income (NOI): Property gross revenues minus operating expenses (before depreciation, interest, and taxes).
Standard Bank Covenants: Most lenders mandate a minimum 1.20x to 1.35x DSCR to buffer against tenant vacancies and interest rate shocks.
FCCR vs. DSCR: Fixed Charge Coverage deducts essential maintenance Capex and includes off-balance sheet operating leases.
Debt Yield: A pure measure of lender risk ($NOI / Loan$) independent of loan terms.

Assess solvency risks in the Altman Z-Score Lab.

Mathematical Formulation

Commercial loan underwriting equations

Annual_Debt_Service = Loan × [ r(1+r)^n / ((1+r)^n - 1) ] × 12

DSCR = Net_Operating_Income / Annual_Debt_Service

FCCR = ( NOI - Capex + Leases ) / ( Debt_Service + Leases )

Max_Allowed_Debt_Service = NOI / Target_DSCR_Covenant

Max_Supported_Loan = Max_Debt_Service × [ (1 - (1+r)^(-n)) / r ]

Debt_Yield_% = ( NOI / Loan_Amount ) × 100%

Evaluate leverage returns in the LBO Lab.

FAQ

Commercial loan underwriting questions

What is Debt Service Coverage Ratio (DSCR) in commercial lending?

DSCR measures the cash flow available to pay current debt obligations: DSCR = Net Operating Income (NOI) / Annual Debt Service. A DSCR above 1.25x is typically required by commercial banks and SBA lenders.

What is the difference between DSCR and FCCR (Fixed Charge Coverage Ratio)?

DSCR measures coverage against debt principal and interest. Fixed Charge Coverage Ratio (FCCR) expands the denominator to include fixed operating leases and deducts unfunded capital expenditures (Capex) from cash flow.

How does a bank determine the Maximum Supported Loan Amount?

The bank divides historical or projected NOI by its required covenant (e.g. 1.25x) to find maximum allowable annual debt service, then discounts that annuity over the amortization period at the prevailing interest rate.

What is Debt Yield and why do commercial lenders use it?

Debt Yield equals Net Operating Income divided by the Loan Amount (NOI / Loan Amount). Unlike DSCR, Debt Yield is independent of interest rates and amortization periods, measuring the lender's raw cash-on-cash return if they foreclosed.

Can I export the DSCR underwriting audit and sensitivity matrix to CSV?

Yes. You can export complete NOI breakdowns, debt service schedules, maximum loan capacity, and 6x5 interest vs. NOI sensitivity matrices as a UTF-8 CSV spreadsheet with formula defense.

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