Sarah runs a small marketing agency in Austin, pulling a $75,000 salary while her business generates $350,000 in annual revenue. When she applied for a business loan to expand, the lender asked for her EBITDA—not her net income. Like many American business owners, Sarah was confusing profit with operating performance. Her company's net income looked low due to a one-time equipment purchase and heavy depreciation on her office build-out. But her EBITDA told a different story: strong operational health. Whether you're seeking SBA financing, selling your business, or benchmarking against competitors, this calculator cuts through the noise to reveal what your business actually earns from operations alone.
How to Use
Enter your net income, then add back interest expense, income taxes, depreciation, and amortization. The calculator instantly delivers your EBITDA. For accuracy, pull these figures from your business tax return (Form 1120 or Schedule C) or recent profit-and-loss statement. Most small business owners complete this in under two minutes.
Pro Tips
Use EBITDA alongside other metrics like free cash flow and gross margin for a complete picture. If you're preparing to sell, calculate 'adjusted EBITDA' by adding back one-time expenses like legal settlements or relocation costs—buyers typically accept these adjustments. For loan applications, most SBA lenders want to see EBITDA at least 1.25 times your annual debt service. A business with $200,000 EBITDA can comfortably service roughly $160,000 in annual loan payments. Track EBITDA monthly or quarterly to spot operational trends before they hit your tax return. Finally, compare your EBITDA margin (EBITDA divided by revenue) against industry benchmarks to gauge competitiveness.
Common Mistakes to Avoid
First, treating EBITDA as actual cash flow. A business showing $150,000 EBITDA might still face cash crunches if customers pay slowly or inventory piles up. Always pair EBITDA with a cash flow analysis. Second, ignoring owner-specific adjustments. If you're paying yourself a below-market $50,000 salary but the role commands $120,000, your EBITDA is inflated. Buyers and lenders will normalize this. Third, forgetting working capital needs. A growing business with strong EBITDA can still fail if it can't fund inventory growth or extended payment terms for customers.
Frequently Asked Questions
What's a good EBITDA margin for a small business?
It varies by industry, but most healthy small businesses aim for 10-20%. A consulting firm might hit 25% or higher, while a grocery store could run at 5%. If your $500,000 revenue business has $75,000 EBITDA, that's a 15% margin—solid for many service industries.
How do lenders use EBITDA for loan qualification?
Banks calculate your debt service coverage ratio (DSCR) by dividing EBITDA by annual loan payments. If your EBITDA is $120,000 and proposed annual payments are $90,000, your DSCR is 1.33. Most SBA lenders require at least 1.10-1.25, meaning you need roughly $1.10-$1.25 in EBITDA for every $1 of debt service.
Is EBITDA the same as taxable income?
No. Taxable income includes interest, taxes, depreciation, and amortization. A business might show $80,000 taxable income but $150,000 EBITDA. This distinction matters because you could owe taxes on far less than your operational earnings suggest, especially with bonus depreciation or Section 179 deductions.