DSCR and debt capacity calculator
Calculate DSCR from EBITDA and annual debt service (bank and seller note), see if the deal meets lenders’ threshold, and get maximum debt service for a target DSCR.
Agreement parameters
Enter annual figures in pesos.
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How to interpret DSCR in a leveraged buyout
DSCR compares cash available for debt service with debt payments in the same period. This tool uses EBITDA as a proxy for that cash flow; in some businesses you need to adjust for cash taxes, maintenance capex, and working capital changes.
Reference reading for DSCR:
- Below 1.00×: cash flow does not cover debt service for that year.
- 1.00×–1.20×: very tight coverage; any drop in revenue or margins creates liquidity stress.
- 1.20×–1.40×: range where many structures start to look reasonable if the business is stable.
- 1.40×–1.60×: comfortable coverage; room to absorb business cycles and reasonable surprises.
- Above 1.60×: very comfortable; usually means you are using less debt than cash flow would allow or being deliberately conservative.
What other tools and guides to review?
In any leveraged buyout, DSCR is one of the minimum filters to decide whether the debt structure makes sense for the business and the buyer. The guide to valuation methods for companies in Mexico connects DSCR with company value and multiples.