DSCR Loan Covenant Cushion Calculator

Quantify how much room your debt service coverage ratio has before a lender's covenant is tripped. Enter NOI, annual debt service, the required DSCR, and permitted add-backs to surface the adjusted DSCR, minimum NOI needed for compliance, dollar headroom, and how much NOI you can shed in a stress test before falling below the threshold.

Trailing twelve-month NOI available for debt service before lender-approved add-backs.
Total scheduled principal and interest across loans governed by the covenant.
DSCR minimum required in your credit agreement (for example 1.20× or 1.25×).
Recurring expenses your lender allows you to add back, such as management fees or non-cash charges.
Defaults to 10%. Apply a NOI decline to see whether headroom survives a downturn scenario.

Calculations assume level debt service. Consult your loan agreement for exact covenant definitions and measurement periods.

Examples

  • $480,000 NOI, $360,000 debt service, 1.25× covenant, $40,000 add-backs, 12% stress ⇒ Adjusted NOI: $520,000.00 producing 1.44x DSCR vs 1.25x required • NOI headroom: $70,000.00 before breach • Minimum NOI to comply: $450,000.00 • Stress test (12.00% drop): 1.27x DSCR (compliant) • Approximate NOI decline capacity: 13.46%.
  • $325,000 NOI, $300,000 debt service, 1.30× covenant, $15,000 add-backs, 12% stress ⇒ Adjusted NOI: $340,000.00 producing 1.13x DSCR vs 1.30x required • NOI headroom: $35,000.00 shortfall right now • Minimum NOI to comply: $375,000.00 • Stress test (12.00% drop): 0.99x DSCR (breach) • Approximate NOI decline capacity: 0.00%.
  • $610,000 NOI, $420,000 debt service, 1.20× covenant, $20,000 add-backs, 8% stress ⇒ Adjusted NOI: $630,000.00 producing 1.50x DSCR vs 1.20x required • NOI headroom: $106,000.00 before breach • Minimum NOI to comply: $524,000.00 • Stress test (8.00% drop): 1.38x DSCR (compliant) • Approximate NOI decline capacity: 16.83%.

FAQ

Can I model multiple loans covered by one covenant?

Yes. Sum the annual debt service for every loan subject to the covenant and enter the combined amount. The resulting DSCR, minimum NOI, and cushion reflect the entire portfolio.

How do I include capital expenditure reserves?

Subtract required reserves from NOI before entering it or list them as negative add-backs so the coverage ratio reflects cash truly available for debt service.

What is an acceptable DSCR cushion for most lenders?

Commercial lenders generally prefer at least a 10% buffer above the covenant. Use the allowable NOI decline output to confirm if your asset clears that safety margin and adjust add-backs or debt strategy if the cushion is thin.

How often should I refresh this analysis?

Update the inputs whenever you finalize quarterly financials or revise budgets. Keeping NOI and add-backs current helps you spot tightening headroom early and open conversations with the lender before a breach occurs.

Does the calculator factor in springing cash traps or sweep provisions?

Not directly. If a sweep would divert cash before you breach, reduce the NOI input to reflect the restricted cash so you can see how quickly the DSCR drops toward the covenant.

Additional Information

  • Add-backs are treated as recurring adjustments that boost NOI before calculating DSCR—enter negative values for recurring charges that reduce coverage.
  • Minimum NOI equals the required DSCR multiplied by annual debt service minus approved add-backs, so a larger buffer signals more covenant protection.
  • Stress testing keeps annual debt service fixed while NOI fluctuates to reveal the percentage decline that would breach the covenant.
  • NOI decline capacity translates your current buffer into the worst downturn you can absorb before a technical default.

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