DSCR is one of the first numbers an underwriter checks, and unlike some credit metrics, there are concrete levers you can pull in the months before applying to move it in your favor.
The two sides of the ratio
You can improve DSCR by raising NOI, lowering annual debt service, or both.
Ways to raise NOI before applying
- Delay discretionary expenses that reduce reported NOI but aren't essential to near-term operations (some equipment purchases, optional marketing spend)
- Add back one-time or non-recurring expenses with proper documentation — legitimate add-backs (a one-time legal settlement, a single bad debt write-off) give underwriters a truer picture of ongoing NOI
- Collect on aging receivables before the application period to convert on-paper revenue into recognized cash flow the lender can verify
Ways to lower annual debt service
- Pay down or consolidate existing high-payment debt before applying, even partially
- Refinance an existing loan to a longer term if the current structure has an unusually short amortization driving up annual payments
- Avoid taking on new debt in the months immediately before applying — a new equipment loan or credit line increases the denominator right when you need it lowest
Timing matters
Most lenders look at trailing 12-month or most-recent-fiscal-year financials. Improvements made just before applying may not yet show up in the period the lender reviews — plan DSCR improvements at least one full reporting period ahead of when you intend to apply.
What to do if DSCR is still below the lender's minimum
Some lenders will still approve with a lower DSCR if you can offer additional collateral, a personal guarantee, or a co-signer — ask directly what compensating factors they accept rather than assuming a below-threshold DSCR is an automatic decline.
Frequently asked questions
Do all lenders use the same minimum DSCR? No — SBA and conventional lenders commonly require 1.25×, but the minimum varies by lender, loan type, and industry risk profile. Ask your specific lender's threshold early.
Does DSCR improvement matter more than D/E ratio for loan approval? Both matter, but DSCR is often weighted more heavily for cash-flow-based lending decisions, since it directly answers "can this business afford the payment."
Use the DSCR Calculator to see your current ratio and the maximum loan your cash flow currently supports.