Q: How do you calculate the debt service constant, particularly if you have multiple loans with multiple lenders?
A: There is a debt service constant for every combination of a) a specific interest rate, b) a specific amortization period, and c) the payment frequency. The associated debt constant is available via Excel formula or we provide an online worksheet.
Worksheet: Debt Service Constant
Mathematical calculation of the Debt Constant
Apply the appropriate debt service constant to each long-term loan and sum the resulting annual debt service to arrive at total borrower debt service for a period. If you're unsure of the financing terms for loans provided by other lenders and can’t locate sufficient information in the footnotes or statements to the business income tax returns, then use your best judgment.