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Is debt service coverage important for the approval of the commercial loan?

April 26, 2017Approval Commercial coverage debt loan service

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Is debt service coverage important for the approval of the commercial loan?

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Yes, it is one of the key factors as to whether a commercial loan is approved. Debt service coverage is the ratio of cash available (after all property expenses) for loan payments to the loan payment. Expressed as: Net Operating Income (NOI) / Principal and Interest on proposed mortgage. Most commercial Lenders require a DSCR of 1.20:1 or higher for most property types.

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Ans: Yes, debt service coverage is one of the key factors of commercial loan approval. Debt service coverage is defined as the ratio of cash available (after all property expenses) for loan payments to the loan payment.