Loan life cover ratio (LLCR)
What is the loan life cover ratio, and how does it differ from DSCR?
ONE OF 366 TERMS · FREE · NO SIGNUP
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
The loan life cover ratio is the present value of a project's forecast cash flow available for debt service over the remaining life of the loan, divided by the debt outstanding. Debt service cover reads one period; the LLCR reads every remaining period at once, so a weak year still to come shows in today's figure, though strong years can offset it. If forecast cash flow to maturity is worth US$130m today against debt of US$100m, the LLCR is 1.3 times. The discount rate, usually the cost of the debt, and the treatment of any reserve account are set in the facility agreement, so two models can disagree.
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
Debt service cover tests one period's cash against that period's payments; the LLCR tests the whole remaining loan in a single present value.
// WORKED IN
// NEXT TO IT
- Cash conversion cycle
- Quality of earnings
- Debtor days
- Debt service cover ratio (DSCR)
- Interest cover ratio
- Debt to EBITDA (leverage)
- Dividend payout ratio
- Debt per kgMS
- Fixed charge cover ratio (FCCR)
- Global cash flow
- Adjusted EBITDA
- Creditor days (DPO)
- Inventory days (DIO)
- Maintenance capex
- Gearing
- Tangible net worth
- Downside case
- Breakeven milk price
- Debt-like items
- Operating leverage
- EBITDAR
- First-lien leverage
- Cash conversion (ratio)
- Order book cover
- Farm working expenses (FWE)
- Cost of production (dairy)
- Advance rate schedule (dairy)
- Liquidity headroom
- Normalised working capital (working capital peg)
- Owner drawings
- Net debt (covenant definition)
- Cash netting cap
- LTM EBITDA (last twelve months)
- Run-rate EBITDA
- Pro forma EBITDA
- Add-back cap
- Cash flow available for debt service (CFADS)
- FFO to debt
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