Fixed charge coverage

Last updated July 31, 2026

Quick Answer

Fixed charge coverage extends debt service coverage to include rent and other fixed obligations.¹

Formula

(EBITDA - unfinanced capex + rent) / (interest + principal + rent)

What it is

Computed as EBITDA less unfinanced capital expenditure plus rent, divided by interest plus principal plus rent. It is a broader test than debt service coverage because it treats the lease as what it operationally is: a payment the business cannot stop making.¹

Operational context

What good looks like

Why It Matters

For trades and distribution acquisitions the lease line is usually what breaks the covenant math, and it is invisible in a coverage ratio that only counts the loan. A business that clears debt service comfortably and rents three facilities can fail this test while passing that one.¹

Term Family

Related concepts

Debt service coverage ratio (DSCR)

Tools & Resources

Formula Page →Calculators →

Frequently Asked Questions

What is Fixed charge coverage in venture capital?

Why is Fixed charge coverage important for startups?

Understanding Fixed charge coverage is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

1.A1-07 — Federal Reserve, 2026 Report on Employer Firms (2025 SBCS)Federal Reserve, 2026 Report on Employer Firms (2025 SBCS)Gov / statistical primary(Fixed charge coverage extends debt service coverage to include rent and other fixed obligations.)primary · A1 · finance-ops · metric

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