Farm Term Debt Coverage Ratio Calculator
Term debt coverage asks whether farm and nonfarm income can cover family withdrawals, taxes, and scheduled intermediate- and long-term debt. It is more useful than asking whether the payment was made once: it shows how much cushion the operation generated.
Run your numbers
Example values are loaded to show how the tool works. Replace every field with your own records or planning assumptions. Nothing entered here leaves your browser.
What the assumptions produce
Repayment capacity divided by scheduled term payments.
Income available for term principal and interest.
Capacity remaining after scheduled term payments.
UMN Extension scorecard range based on the calculated ratio.
How this calculator works
- 1Add back depreciation and term-debt interest to income because the denominator separately includes scheduled principal and interest.
- 2Subtract family living, owner withdrawals, and income taxes to find capital debt repayment capacity.
- 3Divide capacity by scheduled term principal and interest. The margin subtracts those payments from capacity.
Reading the result
- University of Minnesota Extension characterizes greater than 1.75 as strong, 1.25–1.75 as caution, and below 1.25 as vulnerable.
- A ratio of 1.00 means scheduled payments are covered with no remaining margin; below 1.00 indicates a shortfall.
- Lenders may normalize income, living expenses, inventories, or one-time events differently. Reconcile this estimate with lender statements.
Reproduce the method
These are the specific public references used to define the calculation and its interpretation. Methodology reviewed August 15, 2026.
- University of Minnesota Extension — Ratios and Measurements in Farm Finance
Term debt coverage definition and commonly accepted ranges.
- USDA ERS — Repayment Capacity Methodology
Capital debt repayment capacity and term debt coverage framework.
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