The typical DSCR tend to vary by the type of lender and the purpose of the financing:
- Senior Lenders: Banks look for a minimum Senior DSCR of 1.2 but prefer the average borrower to have a Senior DSCR of 1.3. The limit not to be exceeded is 1.2.
- Total Debt: Banks look for a minimum Total DSCR of 1.1 but prefer the average borrower to have a Total DSCR of 1.3. The limit not to be exceeded is 1.1.
- Mezzanine Funds: Mezzanine lenders typically look for a minimum Senior DSCR of 1.3 with an average borrower having a ratio of 1.5. The limit not to be exceeded is 1.3. They look for a minimum Total DSCR of 1.2 with an average of 1.6. The limit not to be exceeded is 1.2.
In summary, lenders want to see the cash flow be at least 1.1 - 1.3 times the debt service to be comfortable with their lending.
