This type of loan is used to evaluate a borrower's ability to repay a loan based on their cash flow. The DSCR is a measure of how much cash flow is available to cover the loan payments after all other operating expenses have been paid. DSCR loans are commonly used in commercial real estate financing, where the property generates income through rental payments. The lender will typically require a minimum DSCR ratio of 1.2 to 1.5, depending on the property type and other factors. The higher the DSCR, the less risk the lender is taking on, and the more likely the borrower is to be approved for the loan.

DSCR loans can be beneficial for borrowers who may not have strong credit or substantial assets, but who have consistent cash flow from a business or rental property. However, borrowers should carefully evaluate the terms and conditions of the loan, including interest rates, fees, and repayment terms, to ensure that it is the right financing option for their needs.