What this calculates

Turns a loan into the three numbers that decide whether it is survivable: the monthly payment, the total interest paid across the term, and the debt service coverage ratio — how many times over your operating cash flow covers that payment. The coverage ratio is the one a lender looks at, and the one borrowers most often skip.

What you will need

Amount, rate and term. The term matters more than borrowers expect. Stretching a loan lowers the monthly payment and raises the total interest, which trades survivability now against total cost later — a trade worth making deliberately.

Operating cash flow. Cash available for debt service, meaning after operating costs but before the loan payment. Use a conservative figure; the point of a coverage ratio is to test a bad year, not a good one.

How to read the result

A coverage ratio close to 1.0 means the unit produces almost exactly its loan payment and nothing more — one weak quarter and you are funding the bank from savings. Lenders want visible headroom for that reason. Run the ratio again with revenue down fifteen per cent: if it falls below 1.0 in that scenario, the loan is sized for the best case, and the best case is not the one that tests you.

Questions about this tool

What coverage ratio should I aim for?

Comfortably above 1.0, with enough headroom that an ordinary bad quarter does not push you under. Lenders publish their own thresholds; the more useful test is whether you still clear it in your downside scenario.

Is a longer term better?

It lowers the monthly payment and improves coverage, at the cost of more total interest. If the shorter term only works in your optimistic case, the longer term is the honest choice.

Does this include the franchisor's fees?

Only through your cash flow figure. Make sure the cash flow you enter is after royalty and ad fund, since both are charged on gross revenue before you get to the loan payment.

For reference only; not legal, tax, or investment advice. Results depend entirely on the figures you enter — check them against your own quotes and your franchise agreement before acting on them.

What this tool does

Monthly loan payment, total interest, and whether the cash flow covers it (DSCR).

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