accounting
EBITDA
EBITDA is earnings before interest, taxes, depreciation, and amortization, a proxy for operating cash flow used in underwriting and business valuation.
Definition
What it means.
EBITDA strips out the financing and accounting decisions that can vary business-to-business and leaves you with a rough measure of core operating profitability. Lenders use it as a quick screen for debt capacity; buyers use it as a basis for acquisition pricing.
EBITDA is not a GAAP metric and can be manipulated. Related variants, EBITDAR, Adjusted EBITDA, add back rent, one-time items, or owner compensation. For small business funding, ICG underwriters generally reconcile EBITDA back to the business bank statements before making an offer.
Now what?
Get an offer that accounts for ebitda.
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