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Debt service is scheduled principal plus cash interest for a stated period. Calculate it by loan and month, reconcile the principal to debt balances and see how a maturity payment changes the cash requirement.
The debt service formula is scheduled principal repayments plus cash interest due in the period. Calculate it by payment date across the loans included in your borrowing schedule. The result answers how much contractual loan-payment cash the business needs for that month, quarter or year.
Debt service for a period = Scheduled principal repayments + Cash interest due
Total debt service = Sum of the included loans' debt service for that period
State the period and scope beside the number. A quarterly payment total cannot be compared with a monthly operating cash figure. A calculation covering bank loans alone cannot silently stand in for a lender's definition that also includes leases or other obligations.
Principal and interest perform different jobs. Principal reduces the amount borrowed. Interest pays the financing cost and normally leaves principal unchanged. The SBA explains that most 7(a) term loans are repaid through monthly payments of principal and interest; other corporate facilities can have different schedules, including interest-only periods and principal due at maturity.
This payment formula does not calculate borrowing capacity or approve a financing decision. It supplies the payment side of a cash comparison. The companion cash available for debt service article addresses the cash-generation side separately.
Start with the signed repayment schedule and current lender statements. Keep one row per facility and due date, with facility ID, currency, opening principal, draws, scheduled principal, cash interest due, payment status and closing principal. Retain amendments so the schedule reflects the terms actually in force.
Useful controls sit beside those rows. Record the interest basis, rate reset date, maturity date and any grace period or principal holiday. Flag fees, optional prepayments and noncash interest separately. If the agreement defines debt service differently, preserve that definition and show the additions in their own columns.
Use the financial debt calculation to establish which borrowing balances belong in scope. A balance-sheet current-maturities line can help check principal due, but it does not replace the dated payment schedule and does not contain the full cash-interest requirement.
A US distributor starts January 2026 with a term loan of $600,000 and a revolving facility balance of $100,000. The term loan requires $15,000 of principal each month and cash interest at an assumed annual rate of 8%. The revolver charges an assumed annual rate of 18%, pays interest monthly and requires its $100,000 principal at March maturity.
For this example, each month's interest equals opening principal multiplied by the annual rate divided by 12, with payments at month-end and no draws or fees. These are illustrative contract assumptions; use the actual agreement's day-count convention and dates for your own schedule.
| Due month | Facility | Opening principal (USD) | Principal due (USD) | Cash interest due (USD) | Debt service (USD) | Closing principal (USD) |
|---|---|---|---|---|---|---|
| January | Term loan | 600,000 | 15,000 | 4,000 | 19,000 | 585,000 |
| January | Revolver | 100,000 | 0 | 1,500 | 1,500 | 100,000 |
| February | Term loan | 585,000 | 15,000 | 3,900 | 18,900 | 570,000 |
| February | Revolver | 100,000 | 0 | 1,500 | 1,500 | 100,000 |
| March | Term loan | 570,000 | 15,000 | 3,800 | 18,800 | 555,000 |
| March | Revolver | 100,000 | 100,000 | 1,500 | 101,500 | 0 |
| Quarter total | 145,000 | 16,200 | 161,200 |
January term-loan interest is $600,000 × 8% / 12 = $4,000. After the principal repayment, February starts at $585,000; its interest is $585,000 × 8% / 12 = $3,900. March interest is $570,000 × 8% / 12 = $3,800.
The revolver's monthly interest is $100,000 × 18% / 12 = $1,500. Its quarter interest is $4,500. Total interest is $11,700 on the term loan plus $4,500 on the revolver, or $16,200. Add $145,000 of scheduled principal to obtain $161,200 of quarterly debt service.
Summing by due month makes the maturity visible:
| Month | Principal due (USD) | Cash interest due (USD) | Debt service (USD) |
|---|---|---|---|
| January | 15,000 | 5,500 | 20,500 |
| February | 15,000 | 5,400 | 20,400 |
| March | 115,000 | 5,300 | 120,300 |
| Quarter | 145,000 | 16,200 | 161,200 |
The monthly payments sum to $20,500 + $20,400 + $120,300 = $161,200. That must equal the facility-row total. In a worksheet with principal in D, interest in E and debt service in F, enter =D2+E2 for each facility row and =SUM(F2:F7) for the quarter.
Then prove the principal movement:
Closing principal = Opening principal + Draws - Principal repayments
Opening debt of $700,000 + zero draws - $145,000 principal repayments = $555,000 closing debt. That equals the remaining term loan of $555,000 plus zero revolver principal. Use the separate debt modeling guide for building a longer borrowing schedule with changing draws and assumptions.
Do not subtract the full $161,200 from debt. The $16,200 interest portion pays financing costs; it does not repay principal. The SEC's financial-statement guide identifies bank-loan repayment as a financing cash flow, illustrating why cash payments and income-statement expense need separate treatment.
Suppose a signed amendment moves the revolver's principal maturity from March to June, while its rate and monthly interest payment remain unchanged. For the first quarter, principal due falls to $45,000. Interest stays $16,200, so quarterly debt service becomes $61,200.
March debt service becomes $15,000 + $3,800 + $1,500 = $20,300. Closing debt is $700,000 - $45,000 = $655,000, including the $100,000 revolver still outstanding. The amendment shifts the principal cash requirement to a later period; it does not erase it. Keep that later maturity visible in the cash calendar.
A coverage comparison then divides appropriately defined cash available by scheduled debt service. The applicable agreement controls both definitions; debt to EBITDA answers a different leverage question using a debt balance rather than scheduled payments.
Bring a sample of your own borrowing schedule and payment records to Covirage; it maps the columns, and its tools compute and check principal, interest and period totals. The external AI model explains the payment movements with every figure traced to its rows. Create a free Covirage account, then set up your business and bring your file.
See Covirage for finance teams for the supporting finance context.
Include only the principal contractually due in the period, plus cash interest due. The entire outstanding balance enters the calculation when it matures or otherwise becomes payable in that period. A long-term balance with later maturities is not all current-period debt service.
Yes. During its interest-only period, scheduled principal is zero and debt service consists of the cash interest due. Principal can become payable at maturity or when amortization starts, creating a much larger requirement than the earlier interest-only payments.
No. Debt service includes principal repayments, which reduce borrowing balances. Interest expense reflects the accounting cost of borrowing and can differ from cash interest paid because of accrual timing, capitalized interest or amortization of financing costs. Keep the cash schedule and expense reconciliation separate.