Before a lender looks at your story, they look at this. DSCR is operating profit divided by the debt repayments you have to make — and most declines happen here.
Debt service coverage ratio is operating profit divided by everything you have to repay in a year, existing and new. A DSCR of 1.0 means every pound of profit goes on debt and there is nothing left for anything else — including a bad month.
Most lenders want to see somewhere around 1.25 or better, which gives a quarter of headroom above the repayments. Some want 1.4 or 1.5 for unsecured lending or for a business with lumpy revenue. Below 1.0 the application is normally declined regardless of how good the plan is, because the arithmetic says you cannot service it.
Lenders assess affordability before they assess ambition. A strong pitch with a DSCR of 0.9 loses to a dull one at 1.4 every time, because the second can definitely pay and the first might not. Knowing your number before you apply tells you whether you are asking for a realistic amount — and if it comes out too low, borrowing less over a longer term is usually the fix rather than finding a more optimistic lender.
It is also worth calculating on the figures a lender will use rather than the ones you would prefer. That means recent management accounts, not last year’s filed accounts, and profit before your own discretionary drawings only if you can genuinely live without them.
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