DSCR (debt service coverage ratio)
Solar finance glossary · South Africa
Quick definition
DSCR (debt service coverage ratio) is the cash flow available for debt service in a period divided by the principal and interest due in that period; a DSCR of 1.0 means the cash flow exactly covers the repayment, and anything above 1.0 is the cushion.
In solar finance the "cash flow" is usually the energy saving or the PPA revenue net of operating costs, so the ratio answers the question funders care about most: does the system pay for itself with margin to spare? For an owner-occupier the calculation is often extended to the whole business, comparing total operating cash flow with total debt service including the new solar instalment.
Typical minimum DSCRs in South African commercial solar are in the range of 1.2 to 1.4 at the project level, higher where the offtaker is smaller or the tariff assumptions are aggressive. Funders test the ratio under downside cases: lower irradiation, slower tariff escalation and a shorter effective life.
ArkFlow is a software platform that facilitates calculating DSCR year-by-year from the proposal cash flows and surfacing it in the underwriting summary.
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ArkFlow is a software platform that facilitates solar finance origination. It is not a bank, lender, credit provider, tax adviser or financial adviser. This definition is general information, not a credit offer or advice. Funders make their own credit decisions and tax treatment should be confirmed with a registered practitioner.