Concept
DSCR — Debt Service Coverage Ratio
The single number that decides whether your business can afford the loan you're asking for. Credit officers look at this before almost anything else.
In plain English
DSCR stands for Debt Service Coverage Ratio. In plain terms, it answers one question — does the business generate enough cash to comfortably pay its loan installments, with margin to spare? It's the ratio of your operating cashflow to your total annual debt service.
A DSCR of 1.0 means the business generates exactly enough to cover repayments and nothing more. Most Malaysian banks want to see 1.25 to 1.50 as a minimum, depending on sector and facility type. Below that, credit will either cut the loan size, extend tenure to reduce the installment, or decline outright.
What matters isn't just the number — it's how credibly you can defend it. Banks don't trust headline revenue. They trust audited profit, operating cashflow from bank statements, and the quality of the earnings that sit underneath.
Worked example
A trading company asking for a RM 1M term loan.
- Annual net operating cashflow
- RM 600,000
- Existing annual debt service
- RM 180,000
- New facility annual debt service
- RM 240,000
- Total annual debt service
- RM 420,000
- DSCR
- 1.43x
A 1.43x DSCR comfortably clears the usual 1.25x minimum — this file has repayment headroom. Credit will still read the cashflow quality, but the arithmetic is in your favour before the conversation even starts.
What bankers watch for
- • Credit uses operating cashflow, not revenue. Top-line RM 5M means nothing if margins are thin.
- • They add every existing facility you hold — not just the one you're applying for. CCRIS reveals them all.
- • Owner's personal debt can pull the consolidated DSCR down when guarantees are structured tightly.
- • Seasonal businesses get rough treatment — banks take the weakest 3-month window, not the annualised figure.
- • A DSCR just above 1.25x on a tight file often gets a smaller loan or longer tenure, not a decline.
Run these numbers on your actual case.
Drop your real figures on WhatsApp. We’ll walk through the math together and tell you what a credit officer would make of it.