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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Run-rate EBITDA

What is run-rate EBITDA, and why do lenders discount it?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Run-rate EBITDA restates earnings as if a recent change had been in place for a full year: the latest quarter multiplied by four, a new contract or price rise annualised, or cost savings counted in full before they have been achieved. It describes what the business might earn rather than what it has earned. Lenders often accept only part of it, cap the adjustment, or require savings to be realised within a set period, because run-rates are usually drawn from the best recent months, and a seasonal business can show a quarter it will not repeat across a year.

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.

// WHAT IT IS NOT

Adjusted EBITDA adds back costs management says will not recur; run-rate EBITDA annualises gains that have not yet arrived. Facility agreements often allow both, and caps often apply to the two together.

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