EBITDA stands for Earnings Before Interest, Tax, Depreciation and Amortisation. It strips away financing costs and non-cash accounting charges to give a clearer picture of how much cash a business generates from its day-to-day trading operations.
Why lenders look at EBITDA
When assessing a business loan application, lenders often use EBITDA as a proxy for a company's capacity to service debt. A common measure is the debt/EBITDA ratio — for example, if your EBITDA is £200,000 and outstanding borrowing is £400,000, your leverage ratio is 2x. Lower ratios generally indicate stronger repayment capacity.
What EBITDA does not show
Because EBITDA excludes depreciation and amortisation, it can overstate cash generation for asset-heavy businesses that need continuous capital investment. It also ignores working-capital movements, so a profitable business on EBITDA terms can still face a cash squeeze. Complement it with free cash flow and the current ratio for a fuller picture.
How it relates to Credicorp facilities
When you apply for a Credicorp Business Loan or Flex revolving credit facility, our decisioning considers your company's EBITDA alongside other trading data. Strong EBITDA relative to the facility size typically supports a faster, higher-confidence decision.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: What is a fixed charge on a business asset?, What does current ratio mean for my company?.