ICR
Last reviewed 13 June 2026 by Nick Lim, finance broker (FBAA).
ICR, or interest cover ratio, measures how comfortably an asset's or business's income covers its interest payments, calculated as income divided by interest expense. Commercial property lenders often want an ICR of at least 1.5 to 2.0 times, meaning income covers interest one and a half to two times over. It sits alongside DSCR and serviceability as a core test for a commercial property loan.
Why ICR Matters
ICR tells a lender how much breathing room there is between income and the interest bill before trouble starts.
- Income divided by interest expense
- Often a minimum of 1.5 to 2.0 times for commercial
- Used with DSCR and serviceability
- A common loan covenant on commercial loans
- Falls when rates rise or income drops
Common Features of ICR
- Ratio of income to interest cost
- Higher is safer for the lender
- Tested at drawdown and over the loan
- Often a covenant that must be maintained
- Sensitive to interest-rate movements
Official reference: asic.gov.au
What is ICR?
The interest cover ratio, income divided by interest expense, showing how well income covers the interest bill.
What ICR do commercial lenders want?
Often at least 1.5 to 2.0 times, though it varies by lender and asset.
ICR vs DSCR?
ICR covers interest only; DSCR covers the full repayment including principal.
Why does ICR matter?
It is a common loan covenant, and breaching it can trigger a review or default.
What lowers ICR?
Rising interest rates or falling income both reduce the ratio and the safety margin.