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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Fixed charge cover ratio (FCCR)

What is fixed charge cover, and when does a desk use it instead of DSCR?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Fixed charge cover extends debt service cover to the other fixed commitments a business must meet whether or not it trades well — rent and operating leases above all. Earnings before rent are divided by rent plus scheduled debt service; some definitions, common in US lending, also deduct maintenance capital spending, tax and owner distributions from the earnings, and the facility agreement decides which applies. It is the more honest test for a business whose obligations to landlords rival its obligations to the bank, such as a retailer with many sites, because a lease default disturbs the business as surely as a loan default does.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

Not a replacement for DSCR where fixed charges are small: it is the same reading with a wider denominator, and on a business with little rent the two converge.

// WORKED IN

// NEXT TO IT

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