what does the loan life coverage ratio tell you 
llcr is a solvency ratio the loan life coverage ratio is a measure of the number of times over the cash flows of a project can repay an outstanding debt over the life of a loan a ratio of 1 0x means that llcr is at a break even level the higher the ratio the less potential risk there is for the lender depending on the risk profile of the project sometimes a debt service reserve account is required by the lender in such a case the numerator of llcr would include the reserve account balance project financing agreements invariably contain covenants that stipulate llcr levels the difference between llcr and dscrin corporate finance the debt service coverage ratio dscr is a measure of the cash flow available to pay current debt obligations the ratio states net operating income as a multiple of debt obligations due within one year including interest principal sinking fund and lease payments however dscr captures just a single point in time while llcr allows for several time periods which is more suitable for understanding liquidity available for loans of medium to long time horizons llcr is used by analysts to assess the viability of a given amount of debt and consequently to evaluate the risk profile and the related costs it has a less immediate explanation compared to dscr but when llcr has a value greater than one this is usually a strong reassurance for investors limitations of llcrone limitation of the llcr is that it does not pick up weak periods because it basically represents a discounted average that can smooth out rough patches for this reason if a project has a steady cash flows with a history of loan repayment a good rule of thumb is that the llcr should be roughly equal to the average debt service coverage ratio 