What is EBITDA and why do lenders look at it?

2 min read

Operating cashWhat it proxies

Pre-financingExcludes interest & tax

AffordabilityWhy lenders use it

What it means

EBITDA adds back depreciation, amortisation, interest and tax to operating profit. Those add-backs are non-cash or financing items, so what is left is closer to the cash the trade throws off. It is not the same as cash flow — it ignores working-capital swings and capital spending — but it is a fast, comparable measure of operating performance.

Why it matters for your company

Lenders often size affordability against EBITDA — for example, testing whether EBITDA comfortably covers the new repayment, similar to a debt-service coverage ratio. A healthy EBITDA margin strengthens an application. Credicorp looks at real bank-verified turnover and trading rather than EBITDA alone, so a lean set of accounts will not rule you out.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

Is EBITDA the same as profit?

No. Net profit is after interest, tax, depreciation and amortisation. EBITDA is before all four, so it is always higher and is used to compare operating performance across companies with different debt and tax positions.

Why is EBITDA criticised?

Because it ignores the real cost of replacing assets (capex) and can flatter a capital-heavy business. Use it alongside cash flow and net profit, not on its own.