TIE vs DSCR: Key Differences
Both ratios measure debt serviceability, but they cover different obligations:
| TIE | DSCR | |
|---|---|---|
| Numerator | EBIT | Net Operating Income (NOI) or EBITDA |
| Denominator | Interest only | Interest + principal payments |
| Strictness | Less strict | Stricter |
| Common Use | Corporate finance | Real estate, SBA loans, project finance |
When Each Is More Relevant
Use TIE when: - Quickly screening a company's debt load - Comparing leverage across corporate bonds - Working with revolving credit facilities (no fixed principal schedule)
Use DSCR when: - Analyzing a commercial real estate loan - Evaluating an SBA 7(a) or 504 loan application - Any loan with fixed amortization schedule
The Critical Difference
A company with TIE = 4× could still have DSCR < 1.0 if it has a large bullet payment due or significant principal amortization. Always check both when full debt service is involved.
Calculate TIE with the TIE Calculator and full debt service coverage with the DSCR Calculator.