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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Adjusted EBITDA

What is adjusted EBITDA, and which add-backs does a lender accept?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Adjusted EBITDA is reported earnings before interest, tax, depreciation and amortisation with items management regards as unusual added back — restructuring costs, a legal settlement, an owner's above-market pay. It is management's own number, outside the audit, and every add-back is a claim that a cost will not recur. A lender tests each one against the history: a cost that has appeared in each of the last few years is part of running the business whatever it is called, and goes back in before any ratio is calculated.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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