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SBA DSCR Calculator

Debt Service Coverage Ratio (DSCR) is the number that decides whether an SBA 7(a) acquisition gets financed. The SBA floor is 1.25×. Most online calculators divide EBITDA by the loan payment — but that overstates the number, because it ignores the salary you have to pay someone to run the business after the seller leaves.

This one nets a market manager salary, so you get the ratio a lender will actually see.

Debt Service Coverage Ratio
1.18×
Below the 1.25× floor — thin coverage
Loan amount$1,800,000
Annual debt service$297,540
CFADS (EBITDA − salary)$350,000
At EBITDA alone: 1.68×. With a market manager salary: 1.18×. That gap is where deals get repriced at the underwriting desk.
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First-pass screen. The full model also nets taxes, working capital, and capex (which lower DSCR), and checks the SBA equity-injection and seller-note standby rules.

How SBA DSCR is calculated

DSCR = CFADS ÷ Annual Debt Service. CFADS is cash flow available for debt service — not EBITDA. From adjusted EBITDA you subtract a market-rate salary for whoever runs the business after close (and, in a full underwrite, taxes, working capital, and maintenance capex). Annual debt service is the yearly principal-and-interest on the SBA loan.

Worked example

A business priced at $2,000,000 with $500,000 adjusted EBITDA, 10% equity injection (a $1,800,000 SBA loan at 11% over 10 years ≈ $297,500/yr debt service):

Same deal, two very different answers. The salary-adjusted number is the one that survives the underwriting desk.

FAQ

How is SBA DSCR calculated?
DSCR = CFADS ÷ annual debt service. CFADS (cash flow available for debt service) starts from adjusted EBITDA and subtracts a market-rate salary for whoever runs the business after close — and, in a full underwrite, taxes, working capital, and maintenance capex. Annual debt service is the yearly principal-and-interest payment on the SBA loan.
What DSCR does the SBA require for a 7(a) loan?
SBA 7(a) lenders generally look for a minimum 1.25× DSCR. Below that, the deal has thin coverage; under 1.0× the business does not generate enough cash to cover its debt.
Why isn't DSCR just EBITDA ÷ debt payment?
Because EBITDA overstates the cash a buyer keeps. If the seller ran the business, you have to pay a manager to replace them — a market salary that EBITDA does not reflect. Lenders model that replacement cost; a broker CIM often does not. That gap is where deals get repriced at underwriting.
What is a good DSCR for an SBA acquisition?
At or above 1.25× is the general lender comfort zone; 1.4×+ gives real cushion for a revenue dip during transition. This calculator shows both the EBITDA-only ratio and the salary-adjusted ratio so you can see how much cushion is real.

Read the deeper write-up: What 20 IT MSP deals taught me about SBA DSCR. Or see what Deal14 is.

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