What is EBITDA?
It might appear to be another long-winded financial abbreviation but, actually, EBITDA is a very important little acronym for you if you’re interested in financing a business and equity funding is on your radar.
It stands for Earnings Before Interest, Tax, Depreciation, and Amortization. It’s basically a complicated description which details your business’s profit.
EBIDTA will help you calculate your company’s overall earnings or net income before all the necessary evils are taken off. Confused? Don’t worry. We’re here to simplify everything you need to know about business finance.
If you’re thinking of using equity funding for business you’ll need to get to grips with EBITDA.
It’s the main figure that equity investors want to know about when they’re considering financing a business. It gives them an idea of your company’s financial stability, profitability and operating performance. And they’re happy to ignore other costs (interest, tax, depreciation and amortization) that can obscure how your business is actually doing. It allows for more accurate comparisons between similar firms – especially if one firm is in the midst of extensive capital projects while another is not.
What should my EBITDA figure look like to attract investment?
It depends on what kind of industry you’re in. Investors know this, and they’ll regularly compare a company’s EBITDA figure to the industry average or to another, similar business, before deciding whether to invest. So it’s important to try to optimise your EBITDA figure if you can before you go all-guns-blazing in search of funding.
Increasing your EBITDA figure
“If only I had a magic wand!” we hear you say. There’s no need, as there are a few simple steps you can take to improve your profitability and start accessing equity funding for business.
Start by making sure you maintain your prices because discounts just reduce your EBITDA. And then think about where else you can do to reduce your costs. Could you cut down on travel or entertainment? Manage your inventories better? Start selling to new markets? Omit lines that are losing money?
Registering free with Swoop will give you the opportunity to integrate your bank account and quickly and safely identify savings across the likes of banking, FX, broadband, and insurance. With average savings per SME being around £3000 it can certainly make a positive impact on your EBITDA.
Whatever you do to make your EBITDA figure rise will make your business more attractive to equity investors.
Let Swoop help
Swoop can talk to you about this, and answer all your EBITDA, and other small business funding questions. We know that funding your business with equity can be very rewarding. But let’s not forget that it can be tough and time-consuming too. And that’s why we’re here, ready and waiting to Swoop in and help – providing you access to equity investors and funding providers, as well as experts, to walk you through the process.
Click here to get in contact with a team member of Swoop and let us give you a hand.
Or, click here to get your business registered on Swoop Funding and start your funding or savings journey right away.