Debt Service Coverage Calculations in Underwriting

There’s more than one method for computing the debt service coverage ratio (DSCR) for operating entities. Since these methods can lead to conflicting results, even when based on the same data, several questions arise. Which DSCR calculation method should be used, EBITDA or UCA? Should the primary or global DSCR result be used for underwriting? Should there be a provision for maintenance capital expenditures? What about 179 depreciation expense? Should a deduction for taxes and living expenses be included? How should shareholder distributions and loans be handled? What should be done with missing debt service schedules? Regulators say that financial institutions should use a “forward-looking” analysis. What does this entail? How does stress testing impact DSCR underwriting? This presentation will address all these issues.

Continuing Education:   Attendance verification for CE credits upon request

This informative session will benefit anyone involved with underwriting or approving commercial loans, including executive management on the loan committee, commercial loan officers, credit analysts, commercial loan underwriters, branch managers with commercial lending authority, loan review staff, and auditors.