Credit calculators, worked out the way a bank does it.
Five calculators credit teams use every day. Example figures are already filled in so you can see how each one works. Enter amounts in ₹ lakh unless a field says otherwise.
Debt service coverage ratio: does the business earn enough cash this year to pay the interest and principal due on its term loan?
Debt service coverage ratio
1.25 or above: comfortable cover.
DSCR = (PAT + Depreciation + Interest on term loan) ÷ (Interest on term loan + Principal repayment). Banks work this out year by year over the loan tenure and look at both the average and the weakest year.
The fixed monthly instalment on a loan, and how much of what you repay goes to interest.
Monthly EMI
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r the monthly interest rate and n the number of monthly instalments.
How much of a cash credit limit a borrower can actually draw, based on stock and receivables in the latest stock statement.
Drawing power
DP = (Stock − Creditors) × (1 − stock margin) + Eligible receivables × (1 − receivables margin). The borrower can draw the lower of drawing power and the sanctioned limit. Margins, the receivable age limit and how creditors are treated depend on the sanction terms.
Maximum permissible bank finance for working capital, compared across the three Tandon Committee methods and the turnover method.
MPBF under Tandon Method II
Method I: 75% of (TCA − OCL). Method II: 75% of TCA − OCL. Method III: 75% of (TCA − core current assets) − OCL. Turnover method (Nayak Committee): 20% of projected annual turnover, with the borrower bringing in another 5% as margin.
Two ratios every credit note opens with: liquidity (current ratio) and leverage (TOL/TNW).
Liquidity and leverage
Current ratio = Current assets ÷ Current liabilities. TOL/TNW = Total outside liabilities ÷ Tangible net worth (net worth less intangible assets). Acceptable levels vary by bank, sector and loan type.
These calculators are for learning. Banks apply their own policies, margins and benchmarks, so treat the results as a guide, not a credit decision. Want the full method behind each one? See the working capital courses.
