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Free debt service coverage calculator.

Recalculates as you type. Share the link or download a one-page PDF.

SamplePre-filled with a fictional sample deal, Cardinal Comfort Systems (HVAC, Charlotte). Type over any figure.

01Dealoptional, for the PDF
02Cash flow

Lender adjustments optional

Only if EBITDA doesn’t already pay a full market salary to the person running the business.

Cash flow used for coverage$0
03Senior loan
04Seller note

05Other debt service

Principal and interest a year on debt the business keeps: assumed equipment or vehicle notes, an existing term loan.

06Target coverage

For reference, not an eligibility test. SBA 7(a) change-of-ownership minimums: 1.25× initial acquisition or owner buyout, 1.15× business expansion, on the last fiscal year or a two-year average (SBA SOP 50 10 8.1, Appendix 15, effective 1 Oct 2026). Conventional banks commonly look for about 1.25× (BizBuySell); each lender sets its own.

DSCR

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Annual debt service
Senior loan$0
Seller note$0
Other debt service$0
Total$0
During standby$0

Cushion before target

–

Max senior debt at target

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During standby

–

Senior loan only

–

before seller and other debt

How it’s calculated formulas, assumptions, sources

Formulas

  1. Loan payment. Monthly payment = P × r ÷ (1 − (1 + r)−n), where r = annual rate ÷ 12 and n = years × 12. Annual debt service = 12 payments. At 0%, P ÷ n.
  2. DSCR = cash flow available for debt service ÷ total annual debt service (senior + seller note + other). The headline uses debt service after any standby ends, the year a lender worries about.
  3. Seller note. Amortising: same formula. Interest-only: principal × rate. Standby: no payments for the standby months; accrued interest compounds annually and is added to the balance, which then amortises over the note’s term. Full standby: no payments while the senior loan is outstanding, so it is left out of debt service.
  4. Cushion = cash flow − target × debt service, also shown as the share of cash flow that could disappear before coverage hits the target.
  5. Max senior debt = the loan whose annual payment equals cash flow ÷ target − seller-note and other debt service, at your senior rate and amortisation (present value of that payment).

Assumptions and sources

  • EBITDA is a proxy. SBA defines historical coverage for acquisitions as EBITDA ÷ post-transaction debt service, then lets lenders adjust for unfunded capex, distributions, S-corp tax distributions and owner compensation (SOP 50 10 8.1, App. 15). Most lenders deduct a market salary, capex and taxes: use Lender adjustments.
  • Seller notes under SBA. Only debt on full standby for the 7(a) loan’s whole term can count as equity (no more than half the required injection). A shorter standby is still debt. Interest-only acquisition debt is tested on an amortisation of 10 years or less.
  • Not modelled: fees, guarantee costs, variable-rate resets, balloons, seasonality, working capital, the guarantor’s personal cash flow.

Illustrative only. Not a credit decision, a lender approval or an SBA eligibility determination. Lenders set their own cash-flow definitions, adjustments and thresholds.

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