Free founder tool
Leverage ratio calculator
Calculate total or senior debt to EBITDA with listed add-backs and optional cash netting. See headroom to your entered maximum, free with no account or login.
| Measure | Result |
|---|---|
| Debt used | $3,000,000.00 |
| Total listed add-backs | $100,000.00 |
| Adjusted EBITDA | $1,000,000.00 |
| Leverage ratio | 3.00x |
| Headroom to maximum (maximum minus ratio) | 1.00x |
| Debt headroom at unchanged EBITDA | $1,000,000.00 |
Negative headroom means the entered maximum is exceeded. Results are rounded to two decimals. Debt headroom is arithmetic, not borrowing availability or a compliance determination.
These figures come from the numbers you enter. Vanward does not check or validate them. This is not lending, legal or tax advice. A credit agreement's own definitions control.
How the math works
Leverage = selected funded debt / adjusted EBITDA. Adjusted EBITDA is trailing twelve month EBITDA plus the listed add-backs. Optional cash netting subtracts eligible cash from funded debt, with a zero floor. Cash eligibility, debt categories and adjustments follow your credit agreement.
For example, $3,000,000 funded debt and $900,000 EBITDA plus a $100,000 listed add-back gives $1,000,000 adjusted EBITDA and 3.00x leverage. Against a 4.00x maximum, headroom is 1.00x or $1,000,000 at unchanged EBITDA. Netting $500,000 eligible cash gives $2,500,000 debt, 2.50x leverage, and headroom of 1.50x or $1,500,000.
Use debt and cash as of the same date and the EBITDA period specified in the agreement. The example add-back is an illustration, not an assertion that any lender accepts it.
Questions founders ask
- How is the leverage ratio calculated?
- Divide selected funded debt by trailing twelve month EBITDA plus the add-backs you list. If cash netting is selected, eligible cash is subtracted from debt, with net debt floored at zero in this illustration.
- How do total and senior debt differ?
- Total funded debt includes all funded debt in the applicable definition. Senior funded debt includes only the senior category. Selecting a category changes the label; enter the correct balance yourself. Your agreement determines what belongs in each.
- Which EBITDA add-backs can I include?
- List each proposed adjustment by description and amount for the same trailing twelve months. Avoid amounts already included in EBITDA. The calculator adds the list but does not determine whether an adjustment is allowed, capped or supported.
- What does leverage headroom mean?
- Ratio headroom is the maximum you enter minus calculated leverage. Dollar headroom is that maximum times adjusted EBITDA minus the debt used. Negative headroom means the maximum is exceeded in this illustration. Dollar headroom is not permission or availability to borrow.
- Can I use zero or negative EBITDA?
- Base EBITDA can be negative, but EBITDA after listed add-backs must be positive. A debt to EBITDA multiple is not meaningful with a zero or negative denominator.
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