Avoiding Costly Mistakes in Calculating Debt Service Coverage


Sep 24, 2020

03:00 pm – 4:30 pm EST
(90-minute webinar – recording also available)

Inadvertent errors in calculating debt service coverage can be costly.  It is critical to accurately determine a borrower’s ability to repay, especially with today’s unstable economy.  Discover how to avoid mistakes while learning more about making accurate determinations and prudent decisions.


The traditional five Cs of credit, often the most important factor in credit risk assessment, serve as the foundation for the assessment of credit risk inherent in loan origination and ongoing monitoring of the institution’s loan portfolio. As part of safe and sound banking practices it is incumbent for an institution to provide for consideration, prior to credit commitment, of the borrower’s overall financial condition and resources, the financial responsibility of any guarantor, the nature and value of any underlying collateral, and the borrower’s character and willingness to repay as agreed. For this reason, accurately determining a borrower’s ability to repay is critical, especially in times of economic instability. This presentation will focus on the factors which could lead to inadvertent errors in the calculation of debt coverage, which could prove to be costly in the credit relationship if the institution incurs loss. Losses and potential erosion of capital are of greatest concern; however, institutions must consider the negative impact erroneous credit decisions may have on the borrowing entity and its ownership. Prudent decisions based on accurate determinations protect the institution and the interests of borrowers and related entities.