DSCR Calculator
DSCR is the first number a project-finance lender looks at. It asks a simple question: for every rupee of loan repayment due in a year, how many rupees of cash does the business actually generate?
Above 1.00, so the projected cash covers the projected repayment — but not by much. Expect close attention to the weakest year of the repayment schedule.
How this was calculated
DSCR = Cash available for debt service ÷ Annual debt service
Cash available = Profit after tax + Depreciation and non-cash charges + Interest on the debt tested
Annual debt service = Interest + Principal repayment falling due in the year
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What the ratio means
DSCR is annual cash available for debt service divided by the annual repayment obligation — principal plus interest. A DSCR of 1.00 means the business generates exactly enough to meet its repayments and not a rupee more, which leaves nothing for a bad quarter. Lenders therefore look for headroom above 1.00. How much headroom is a matter of each lender’s credit policy, the sector, and the strength of the security — it is not a fixed national rule, and anyone who tells you otherwise is guessing.
Which cash figure to use
Use cash available for debt service, not net profit. In practice that is profit after tax, plus depreciation and other non-cash charges, plus the interest that is itself part of the debt service being tested. Using net profit alone understates your position, sometimes badly, because depreciation on a new plant is large and is not a cash outflow.
The number lenders actually test
A single-year DSCR is a snapshot. Term-loan appraisals usually test the ratio in every year of the repayment schedule and look at the weakest year, plus an average across the tenure. A project that is comfortable in year five and thin in year one still has a year-one problem — which is often solved with a moratorium rather than a smaller loan.
Common questions
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