Debt service coverage and the ratios lenders run
DSCR, gearing, current ratio and interest cover — how each is calculated and the levels that usually pass.
Debt service coverage ratio (DSCR)
EBITDA divided by total debt service for the same period, including the facility you are requesting. It answers one question: does the business generate enough to make the payments?
Most Caribbean lenders look for at least 1.25x, and stronger for cyclical or seasonal sectors. Below 1.0x the business cannot cover the obligation from earnings.
Gearing
Total debt against equity or total assets. High gearing means little cushion if trading weakens. Existing shareholder loans are often counted, so disclose them.
Current ratio
Current assets over current liabilities, a short-term liquidity check. Below 1.0x signals that near-term obligations exceed near-term resources.
Interest cover
EBITDA over interest expense. It isolates the cost of borrowing from the repayment of principal and is often used alongside DSCR for revolving facilities.