RIVER BEAR INSIGHTS · ARTICLE
DSCR: what a cash-flow ratio can—and cannot—tell you
A practical commercial DSCR example, with a downside scenario and the questions to ask before relying on it.
Published September 30, 2026 · River Bear Financial · Prepared with AI assistance. Educational information, not personalized financing advice.
Start with the definition
In this commercial example, debt-service coverage ratio divides annual net operating income by annual debt service. Ask the lender how it defines both figures; rental-property programs may use a different calculation.
A fictional example
Suppose a property has $150,000 in annual net operating income and $120,000 in annual debt service. Dividing the first by the second gives a DSCR of 1.25×. That leaves a $30,000 difference under these assumptions, before items excluded from this simplified calculation.
If NOI falls 10% to $135,000 while debt service stays the same, the ratio becomes 1.125×. This is arithmetic, not a lender threshold or a prediction of performance.
Ask what the ratio leaves out
- Are vacancy, management, maintenance, and reserves treated consistently?
- Is income based on current operations or projected improvements?
- Could debt service change after a rate adjustment?
- What additional equity, liquidity, collateral, and guarantees are required?
A ratio alone does not establish approval or profitability. Bring the underlying records so the assumptions can be reviewed.
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Bring us the property.
And the questions.
Start with the goal, the timing, and the financing need.