A debt sizing model that determines how much debt a borrower can support, given a target Debt Service Coverage Ratio (DSCR) and projected cash flow available for debt service (CFADS). Debt service is sized directly off CFADS and the target DSCR, and the maximum debt is calculated two independent ways — as the present value of the debt service stream, and by building the interest/principal amortization schedule forward — with both methods cross-checked against each other.
With $100 of annual CFADS, a 2.0x target DSCR, and a 1% cost of debt, the model supports roughly $195 of debt — the ending balance in the amortization schedule lands at exactly $0, confirming the two sizing methods agree.
Debt service stays flat at $50/year, but as the balance amortizes down, the interest component shrinks and the principal component grows — a standard mortgage-style amortization profile.
Interest vs. Principal Repayment by Year
Full amortization schedule
| Year | Opening Balance | Interest | Principal | Closing Balance |
|---|---|---|---|---|
| Year 1 | $195.10 | $1.95 | $48.05 | $147.05 |
| Year 2 | $147.05 | $1.47 | $48.53 | $98.52 |
| Year 3 | $98.52 | $0.99 | $49.01 | $49.50 |
| Year 4 | $49.50 | $0.50 | $49.50 | $0.00 |
Max debt is highly sensitive to the DSCR covenant a lender requires — moving from a 3.0x to a 1.5x DSCR target roughly doubles the debt capacity, since a looser coverage requirement allows a larger share of CFADS to go toward debt service.
Max Debt by Target DSCR
Debt capacity across DSCR covenants
| Target DSCR | Annual Debt Service | Max Debt |
|---|---|---|
| 1.5x | $66.67 | $260.13 |
| 2.0x | $50.00 | $195.10 |
| 2.5x | $40.00 | $156.08 |
| 3.0x | $33.33 | $130.07 |