How this calculation works
Compare a borrowing commitment with the monthly free cash flow available to service it. The coverage figure is the entered cash flow divided by this loan’s instalment, so it highlights a thin repayment cushion even when the business reports revenue or accounting profit. Use a realistic cash-flow period and account for existing commitments before deciding what cash is actually available.
Worked example
This example uses illustrative inputs. Your current result is shown above.
For ₹2,40,000 borrowed at 12% annual reducing-balance interest for 12 months, with ₹2,400 processing fee, the EMI is ₹21,323.71. Total repayment is ₹2,58,284.51, including ₹18,284.51 interest and fees. ₹40,000 available monthly cash flow covers the EMI about 1.88 times.
Assumptions and limits
- Monthly free cash flow is a manual amount available before this proposed loan payment, using a consistent treatment of other debt obligations.
- This single-payment coverage calculation is not a lender’s complete DSCR covenant or underwriting model. Seasonal sales, working-capital swings and fees financed into principal are excluded.
Questions people ask
Can I enter monthly revenue as cash flow?
Revenue alone may overstate repayment capacity. Deduct the cash operating commitments relevant to the period before choosing an available-cash figure.
Does coverage above one guarantee approval?
No. It only means the entered cash amount exceeds this modelled instalment. Lenders also evaluate repayment history, other debts, security and their own cash-flow definitions.