PROFITTHEORY

Acquisition DSCR planner

Debt service coverage ratio calculator for acquisitions

DSCR = cash flow available for debt service ÷ annual debt payments. A DSCR of 1.25x means $1.25 of cash flow for every $1 of payments. Many lenders look for roughly 1.25x or more on acquisitions, but requirements vary.

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Estimates only. Results vary. No guarantee of approval, rates or savings.

Profit Theory is not a lender. Providers make all funding decisions; approval is never guaranteed.

The formula, in a spreadsheet

In Excel or Sheets: =CashFlow / (PMT(rate/12, months, -loan) * 12). Cash flow is typically EBITDA adjusted for owner compensation and one-time items, minus any required capital spending.

Include every payment

Add the seller note (if paid), equipment loans and any existing debt that stays with the business. Leaving one out overstates coverage.

Run the numbers

Blue = you enterGreen = calculatedGray = assumptionAmber/red = check this
$

Net income + interest + depreciation/amortization + documented add-backs.

$
$
$
%
years
x

Debt service coverage (DSCR)

2.64x

Meets your 1.25x target.

Debt / EBITDA

2.17x

New annual payments

$77,639

Max new loan at 1.25x

$1,313,781

Each lender calculates cash flow and coverage its own way. Educational estimate, not a credit decision.

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Estimates only. Results vary. No guarantee of approval, rates or savings.

Estimates only. Results vary. No guarantee of approval, rates or savings.

Talk with a financing specialist

Common questions

What is a good DSCR?

Many lenders look for 1.25x or more, sometimes higher for riskier deals. Lenders decide.

Do I subtract my salary?

Lenders usually deduct a market salary for the new owner-operator.

What if DSCR is too low?

Lower the price, add equity, extend the term or use a standby seller note.

Related

Understand debt service coverageBusiness acquisition financing