Debt service coverage ratio (DSCR)
The debt service coverage ratio (DSCR) is cash flow available for debt service divided by the principal and interest due in the same period. A DSCR of 1.3x means the borrower earns $1.30 for every $1.00 it owes the lender.
DSCR on a small cluster
| Contracted revenue | $600,000 a month |
| Power, colocation, staff | $180,000 a month |
| Net operating income | $420,000 a month |
| Principal and interest | $300,000 a month |
| DSCR | 1.4x |
Hypothetical.
How it works
Cash flow over debt service, tested monthly or quarterly. The numerator is net operating income: revenue minus power, colocation, staff and other operating costs. The denominator is scheduled principal and interest.
Lenders set a floor, often by tier. GPU lenders want monthly revenue to exceed debt service by 1.2-1.5x, and signed offtake contracts that cover at least 1.0x on their own (how to finance a GPU cluster). Our Neocloud Credit Score asks for 1.2x on contracted cash flow at AC-1, rising to 1.5x at AC-4.
What lenders check
Fixed costs make it move fast. A small drop in utilization moves net operating income a lot; a financed cluster breaks even at roughly 70% utilization in our cost model.
A covenant gives an early trigger. Falling below the DSCR covenant typically starts a cash sweep or blocks distributions to equity, before a payment is missed.
Ask which revenue is in the numerator. Take-or-pay revenue from a creditworthy offtaker is worth more than on-demand revenue, which lenders discount heavily.
Discuss a transaction
Send us the equipment list and the loan or lease you have in mind. We will come back with an indication and the questions we would need answered.
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