DSCR loans are often used for large commercial real estate projects, such as office buildings or shopping centers. The loans can beA DSCR, or debt service coverage ratio, is a key metric used in the commercial loan market. The ratio measures a company’s ability to make debt payments by comparing earnings before interest, taxes, depreciation and amortization (EBITDA) to total debt payments.
A ratio of 1.0 means that a company has exactly enough earnings to cover its debt payments. A higher ratio indicates that a company has more than enough earnings to cover its debt payments, while a lower ratio suggests that a company may be struggling to make its payments.
Lenders use the DSCR to assess a company’s creditworthiness and risk profile. A low DSCR could lead to higher borrowing costs or even rejection of a loan application. Used to finance the purchase, development, or construction of the property.