Small Business Loan Affordability Calculator
Determine how much business loan you can afford based on your revenue, expenses, and cash flow.
How much business loan can you afford?
Based on your net operating income and a target Debt Service Coverage Ratio (DSCR).
Includes COGS, payroll, rent, utilities, marketing—everything except loan payments.
Most lenders require 1.20–1.35x.
How to use this calculator
- Enter your annual revenue—total sales or gross receipts for the trailing 12 months.
- List annual operating expenses excluding any existing loan payments. Include COGS, payroll, rent, utilities, marketing, and software.
- Add existing debt service—the annual principal and interest you already pay on outstanding business loans.
- Set the required DSCR—most banks require 1.20–1.35x. SBA loans typically want 1.15–1.25x; commercial real estate lenders may want 1.30x+.
- Enter the interest rate and term from a recent quote. Longer terms unlock larger loan amounts but cost more interest.
- Click Calculate to see the maximum loan you can afford while keeping your DSCR at or above the target.
How business loan affordability is calculated
Lenders don't just look at your revenue—they look at how much free cash your business generates after operating expenses, and how much of that cash is already spoken for by existing debt. The single most important metric they use is the Debt Service Coverage Ratio (DSCR), which compares your net operating income to your total debt payments. Understanding DSCR is the key to knowing how much you can borrow.
The DSCR formula
DSCR = Net Operating Income ÷ Total Annual Debt Service
Net Operating Income (NOI) equals annual revenue minus operating expenses—not including interest, taxes, depreciation, or amortization. Total Annual Debt Service is the sum of all principal and interest payments across every business loan you owe, including the new one you're applying for. A DSCR of 1.0x means your business generates exactly enough cash to cover its debt payments. A DSCR of 1.25x means you have a 25% cushion.
Back-solving for the maximum loan amount
Here's where it gets useful. Once you know your NOI and the lender's required DSCR, you can calculate the maximum debt service your business can support:
Max Annual Debt Service = NOI ÷ Required DSCR
Subtract your existing annual debt service to find the room available for the new loan. Divide by 12 to get the maximum monthly payment. Then back-solve using the standard amortization formula to convert that monthly payment into a loan principal at your quoted rate and term:
Loan Amount = M × [(1+r)n − 1] ÷ [r × (1+r)n]
Where M is the max monthly payment, r is the monthly interest rate, and n is the total number of payments.
Why DSCR matters more than revenue
A $2 million-revenue business with thin margins may qualify for less debt than a $500,000-revenue business with healthy margins. Lenders care about cash, not top-line growth. A high DSCR not only unlocks larger loan amounts but also unlocks lower rates and longer terms, because the lender sees less risk of default. Improving your DSCR by trimming operating expenses or growing NOI is one of the most leveraged things you can do before applying for financing.
What this calculator doesn't capture
This tool models the debt-service constraint, which is the binding limit for most term loans. It does not account for collateral coverage (lenders often want loan-to-value under 80%), personal credit score, time in business, industry risk codes, or seasonal cash flow swings. SBA Express loans cap at $500,000; SBA 7(a) standard loans go up to $5 million; conventional bank loans vary widely. Always validate your number with a loan officer before making plans.
Worked example
Scenario: A landscaping business with $850,000 in annual revenue, $620,000 in operating expenses, and $24,000/year of existing debt service. The owner applies for a 5-year term loan at 9.5% interest, and the bank requires a 1.25x DSCR.
- NOI: $850,000 − $620,000 = $230,000
- Max total annual debt service: $230,000 ÷ 1.25 = $184,000
- Less existing debt service: $184,000 − $24,000 = $160,000 available for new loan
- Max monthly payment: $160,000 ÷ 12 = $13,333
- Monthly interest rate: 9.5% ÷ 12 = 0.7917%
- Number of payments: 5 × 12 = 60
- Max loan amount: $13,333 × [(1.007917)^60 − 1] ÷ [0.007917 × (1.007917)^60] ≈ $629,000
At this loan size, total annual debt service climbs to $184,000 (existing + new) against $230,000 NOI, producing exactly a 1.25x DSCR—the minimum the bank will accept. Borrowing more would breach the covenant and likely trigger a decline. Borrowing less leaves cushion for unexpected downturns.
Glossary
- DSCR (Debt Service Coverage Ratio)
- NOI divided by total annual debt service. The most widely used measure of a business's ability to repay debt. Most lenders require at least 1.20–1.35x.
- Net Operating Income (NOI)
- Revenue minus operating expenses, excluding interest, taxes, depreciation, and amortization. Represents cash available to service debt.
- Debt Service
- The total of all principal and interest payments due on a loan over a given period, usually expressed annually.
- Amortization
- The schedule by which a loan is repaid in equal periodic payments covering both principal and interest, with interest front-loaded.
- Covenant
- A contractual condition in a loan agreement—such as maintaining a minimum DSCR—breach of which can trigger default or penalty rates.
- SBA 7(a) Loan
- The Small Business Administration's flagship loan program, capped at $5 million with up to 25-year terms for real estate. Government-guaranteed, lower rates.
Frequently asked questions
Quick answers to the most common questions about small business loan affordability calculator.
This calculator is provided for informational and educational purposes only and does not constitute financial, legal, tax, or professional advice. Results are estimates based on the inputs you provide and standard assumptions. Actual figures may vary. Please consult a qualified professional before making financial decisions. Read our full disclaimer.