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Small businesses make up a substantial portion of the New York State economy. According to New York’s 2023 Annual Report on the State of Small Business, a full 98% of New York businesses have fewer than 100 employees, and just over 92% of that total have fewer than 25 employees.

To support small and medium-size businesses in the Empire State, New York offers a number of generous grant programs that can help entrepreneurs launch or grow their companies. Unlike small business loans, grants typically don’t have to be repaid. While competition for New York grants can be stiff, here are five small business grants in New York to explore.

Grants for Small Businesses in New York

If you’re looking for a small business grant to grow or start your business in New York, here are some options to consider.

Global NY Fund Grant Program

•   Program description: The Global NY Fund Grant Program can help you export your goods or your services from the Empire State to foreign markets.

•   Incentive: Eligible businesses can receive up to $25,000 in reimbursement for expenses related to market customization, participation in trade shows, export workshops, or product adaptations to meet foreign regulatory requirements.

•   General requirements:

◦   Be a New York small business owner

◦   Have 500 or fewer employees statewide

◦   Be new to export or expand your exports to new markets abroad

◦   Have at least 51% of the value of your goods or services originate in New York, or be certified as a local producer

◦   Your business is at least 12 months old

◦   You have a demonstrated need for grant assistance

◦   You understand how exporting works and the cost of doing business with foreign buyers

•   How to apply: The Global NY Fund Grant Program is due to reopen for business by the end of 2024. You can find more information on its website .

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The Creative Opportunity Fund

•   Program description: In partnership with the New York State Council on the Arts (NYSCA), A.R.T./New York offers the Creative Opportunity Fund (COF) to provide general operating support grants to theaters throughout New York State.

•   Incentive: Small professional theaters with budgets under $500K can receive general operating support grants of $2,000 to $5,000.

•   General requirements:

◦   Be a New York-based theater company with at least two years of public programming experience

◦   Operate as a 501(c) nonprofit, fiscally sponsored, or unincorporated artist collective organization

◦   Host live or virtual performances in New York State

◦   Have annual expenses totaling $500,000 or less

◦   Commit to allocating at least 50% of any funding awarded through the COF to providing compensation to artists

•   How to apply: The application process for the 2024 COF program closed in October 2023; check the COF website back in early August 2024 for 2025 grant opportunities.

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City of Troy’s Community Business Investment Grant

•   Program description: The City of Troy’s Community Business Investment Grant provides reimbursement funds to eligible commercial and mixed-use projects that strengthen the surrounding community. Such projects can include interior or exterior renovations to a commercial space, among other capital improvements.

•   Incentive: Business owners in Troy can receive between $5,000 and $50,000 in reimbursement for expenses related to a capital improvement project.

•   General requirements:

◦   Be a property owner or business owner in the City of Troy

◦   Be current on all taxes

◦   Propose a capital improvement project, such as making energy efficiency upgrades to your commercial property or rehabbing an industrial building

◦   Certify a minimum 50% match requirement

◦   Have proof of available financing for your project

◦   Begin project within six months of grant approval

◦   Complete the project within one year of project commencement, unless granted an extension

•   How to apply: Check the City of Troy’s website for updates on 2024/2025 grant opportunities and deadlines.

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City of Rochester Small Business Grant Programs

•   Program description: The City of Rochester offers small business reimbursement grants to eligible retail and neighborhood service establishments that need capital for items such as advertising, furniture/equipment, exterior signage, computers, architectural services, and security equipment.

•   Incentive: Startups in business for up to 12 months are eligible for up to $5,000. Existing businesses (in business for 12 months or more) are eligible for up to $8,000.

•   General requirements:

◦   Be a retail establishment or consumer services business owner with annual gross revenues of $5 million or less

◦   Operate your Rochester-based business in accordance with local zoning regulations

◦   Meet the U.S. Department of Housing and Urban Development (HUD) eligibility guidelines of providing an essential product or service in low-to-moderate-income areas (or meet other HUD guidelines)

◦   Be current on your sales and property taxes

◦   Have no outstanding code violations or nuisance points on your commercial property

◦   Operate an eligible business or enterprise (adult entertainment businesses, check-cashing facilities, gambling facilities, gun shops, home-based businesses, payday loan operations, and vape shops are not eligible)

•   How to apply: You can submit an online request for assistance/information on the City of Rochester’s website .

Market New York Tourism Grant

•   Program description: The Market New York grant program can help small businesses and other eligible applicants pay for tourism marketing initiatives in the Empire State.

•   Incentive: Various funding amounts are available for tourism marketing initiatives, capital projects, and special events (such as meetings, conferences, conventions, festivals, and athletic competitions).

•   General requirements:

◦   Be a not-for profit corporation or a for-profit business certified in the state of New York

◦   Propose a marketing or capital project that will promote tourism in the region or state

◦   Complete and submit a Consolidated Funding Application (CFA)

◦   Make a 50% match for working capital/marketing projects with a $50,000 minimum request.

◦   Make an 80% match for capital projects with a $150,000 minimum request

•   How to apply: Contact the New York State Division of Tourism staff for information about the next round of funding.

Who Provides Small Business Grants in New York?

Federal, state, and local governments and agencies; nonprofit organizations; and institutions of higher learning offer a variety of small business grants in New York.

Recommended: California Small Business Grants

Do You Have to Pay Back a Small Business Grant?

Typically, no. Unlike small business loans, small business grants generally do not need to be repaid. However, that doesn’t mean there are no strings attached. Small business grants usually come with terms and conditions and require the recipient to sign a funding agreement. If for any reason you violate the terms of the grant, you may be responsible for paying back the funds. For example, using the grant for an illegitimate purpose may violate the agreement and require business owners to pay back the grant.

In some cases, small business grants may require you to spend the money by a certain date. You may also have to provide proof of payment and a written statement detailing how you’ve spent the grant.

Who Is Eligible for Small Business Grants in New York?

Local business owners or operators of an enterprise with fewer than 500 employees may be eligible for small business grants in New York.

The U.S. Small Business Administration’s Office of Advocacy generally defines a small business as an independent business having fewer than 500 employees. A business with just a few employees, even self-employed individuals, may also be eligible for small business grants.

What Industries Does New York Support With Grants?

New York offers a variety of grants supporting the following industries:

•   Manufacturing

•   Performing arts

•   Technology

•   Renewable energy

•   Restaurants

•   Retail

•   Tourism

New York Resources for SMB Owners Looking for Funding

Here’s a look at some resources for small- and medium-sized businesses looking for funding in the Empire State.

New York Small Business Development Center (NYSBDC)

The NYSBDC is a statewide program that offers New York’s small business owners with the following services at no cost:

•   Business training courses, seminars, and workshops

•   Library and research services

•   Confidential business counseling

SBA District Offices in New York

The U.S. Small Business Administration (SBA) is a federal agency that provides resources and support to small business owners. The SBA has three district offices in New York:

•   SBA Buffalo District Office . This SBA district serves 14 of the westernmost counties of New York. Depending on where you’re based, you can contact the main office in Buffalo or the satellite office in Rochester.

•   SBA Metro New York District Office . This SBA district serves 14 counties in New York City, Long Island, and the surrounding area. Depending on where you’re based, you can contact the main office in New York City or the satellite office in Hauppauge.

•   SBA Syracuse District Office . This SBA district serves 34 counties in upstate New York. Depending on where you’re based, you can contact the main office in Syracuse, branch office in Albany, or the satellite office in Elmira.

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Alternative Funding Sources for Small Businesses in New York

If you don’t qualify for small business grants in New York State, you’re not necessarily out of funding options. Here are some other ways you may be able to get the capital you need to launch or grow your business in New York.

NY Microloan Lenders

Community-based nonprofits may offer microloans of anywhere from $500 to $50,000 to underserved small business owners in New York, such as women and minorities. Interest rates tend to be low (or zero in some cases), and the qualification criteria are often less stringent compared with other business loans.

Microloans can provide an infusion of cash to get a startup off the ground or grow an existing business. However, you may need to provide a microlender with a personal guarantee and collateral in order to secure funding.

SBA loans for New York Businesses

An SBA loan is a type of SMB loan that is partially guaranteed by the U.S. Small Business Administration and offered by banks and other lenders. Loan amounts range from $500 to $5.5 million.

Because the federal government guarantees to repay most of the loan amount if a borrower defaults, it reduces the lender’s risk and encourages them to offer loans to companies they might not otherwise work with. For small business owners who can’t qualify for a traditional business loan, an SBA loan can be an ideal option.

SBA loan rates are among the lowest available, and repayment terms can go up to 10 or 25 years, depending on loan usage. However, the SBA loan application process can be long and rigorous.

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New York SMB Loans from Private Lenders

Banks, credit unions, and online lenders may offer business term loans to New York business owners. Newer businesses typically have a better chance of approval through online lenders because they typically offer more flexible qualification requirements.

With a term loan, you receive a lump sum of cash upfront and repay it over a set period of time, often up to 10 years. Your business’s history, annual revenue, and creditworthiness (including your personal credit) typically determine which loan terms you’ll have access to and how much you can borrow.

Recommended: What to Know About Short-Term Business Loans

Business Lines of Credit

A business line of credit is a flexible financing option that lets you borrow money on an as-needed basis up to a predetermined amount. Similar to a credit card, you pay interest only on the money you’ve drawn. Once you’ve repaid your funds, you can draw on your line again.

Business credit lines are offered by banks, online lenders, and other lenders. Banks tend to have more stringent qualifications and lower rates, while online lenders may be more lenient, but offer higher rates.

Equipment Loans

If your business needs money to purchase equipment or machinery, equipment financing may be a good solution. The equipment you purchase serves as collateral for the loan. If you default, the lender can repossess and resell the equipment to recuperate some of its losses. Since this lowers risk for the lender, equipment financing often comes with competitive interest rates.

The amount you can borrow with an equipment loan depends on what you need to finance. Many banks and online lenders will offer financing that covers the full cost of equipment.

The Takeaway

A variety of small business grants are available in New York State, whether it’s from state or local governments or the private sector.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

How do you get a small business grant in New York?

To find a small business grant in New York, you might start by contacting the state’s Economic Development Administration and your local Small Business Development Center. You typically need to submit a grant application as a qualified small business owner to be considered for a small business grant in New York.

How hard is it to get a business loan in New York?

You typically need to have been in business for at least two years and have strong financials to qualify for a business loan from a bank. Online alternative lenders tend to have more flexible qualification criteria but generally charge higher interest rates.

What is the easiest SBA loan to get approved for?

There’s no guarantee you’ll get approved for any SBA loan, but SBA microloans may be one of the easier ones to get if you’re a new business owner. Startups may be eligible for SBA microloans of up to $50,000. If you’re looking for a streamlined application process, look into an SBA Express loan.

Photo credit: iStock/Prostock-Studio

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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If you need funds to launch a new venture or expand a current business, a small business loan can be a great option. But how much of a loan can you get? Depending on the lender and the type of financing, you can typically borrow anywhere from $500 to more than $5 million.

Exactly how much a lender will offer your small business, however, will depend on your company’s financials, time in business, and credit profile. Read on to learn how big of a small business loan you may be able to get, as well as the different types of business loans and how to qualify for the best rates and terms.

How Much Do Most Business Loans Offer?

How much business loans offer depends on the type of loan you’re after, such as whether it’s a short term loan, Small Business Administration (SBA) loan, or bank loan. Here’s a breakdown of some of the most common types of small business loans.

The differences between loans don’t stop with the amount, however. You’ll also pay different interest rates for each kind of loan. To get a sense of how much different types and sizes of loans may cost, you may want to use a small business loan comparison site.

To use a loan comparison tool, you generally need to plug in an approximate loan amount, as well as some basic stats about your business, including time in business, revenue over the last 12 months, and credit score.

Amounts Offered by Types of Lenders

You can generally borrow the highest amounts with traditional lenders, but you’ll have to jump through a few hoops to qualify. Luckily, there are many small business loan options on the market, even for larger loan amounts. Here’s a look at some of the most common lending options for small businesses and how much you may be able to borrow with each.

Bank Loans

Banks typically offer the largest loan amounts, and if you have the cash flow and the credit history to qualify, you can often borrow as much as $1 million. You might even be able to borrow more, though you’ll likely need stellar credentials to do so. Some large commercial banks don’t even have a maximum borrowing limit, while smaller banks typically do.

SBA Loans

The U.S. Small Business Administration (SBA) is an independent government agency that helps small businesses by guaranteeing loans issued by banks and other private lenders. Due to reduced risk to the lender, SBA-backed loans offer large amounts (as much as $5 million), as well as low interest rates compared to typical business loan interest rates.

Online Loans

If you have thin or poor credit, an online loan may be your best option. These loans can be anywhere from $1,000 to $500,000, and the qualification process is generally easier than loans from traditional lenders. The interest rate, however, will likely be higher than an SBA or traditional bank loan.

Short-Term Loans

Typically, a short-term business loan has a term of one year or less and is structured as a lump sum loan (which can be as much as $500,000) with repayments made on a daily or weekly schedule. This type of loan is most commonly offered by online lenders, and interest rates tend to be higher than other types of loans.

Medium-Term Loans

The definitions vary, but most commonly, medium-term loans are ones with a repayment period between two and five years and loan amounts up to $500,000. Borrowers usually have to make payments every month or twice a month. You generally need a business producing revenue to qualify for a medium-term loan and a credit score of at least 700.

Lines of Credit

With a business line of credit, a lender gives you access to a specific amount of cash (ranging from $1,000 to $500,000), which you can draw from whenever you want and use to cover whatever expenses you need. You’ll only pay interest on the funds you use. Lines of credit can be a great option for small businesses facing frequent cash flow issues. They can also be a good thing to have in your back pocket in case of emergencies.

Equipment Financing

Equipment financing limits vary with each bank (or online lender) and each piece of machinery, but you can generally borrow between 80% and 100% of the value of the equipment or vehicle you are purchasing — often up to $500,000. Typically, the equipment itself acts as the loan’s collateral and the repayment period often mirrors the equipment’s expected lifespan.

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Microloans

Microloans generally run between $500 to $10,000, and can be a great option for new companies or borrowers with poor credit. Unlike short-term loans, microloans are typically available through nonprofits and come with relatively low rates. However, microlenders often have specific parameters for a business to qualify for the loan.

Invoice Factoring

Invoice factoring is a short-term financing method that allows businesses to sell unpaid customer invoices to third-party invoice factoring companies. You can often get 85% of your unpaid invoices up front. The factoring company then collects payment from your customers and gives you the remaining balance minus fees. While these fees can be hefty, knowing what invoice factoring is and how to use it may help your business get past difficult financial times.

Business Credit Cards

Small business owners who are interested in financing ongoing expenses and working capital can sometimes be drawn to business credit cards. Opening a credit line with a business card offers flexibility and carries advantages, such as rewards for spending, 0% introductory annual percentage rates (APRs), and the capacity to build business credit. The downside is a revolving line of credit may come with high interest costs (once the introductory rate ends) and other fees.

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7 Factors That Affect How Much of a Loan You Can Get

There are generally a lot more requirements for small business loans than there are for personal loans. Here are some key factors that can influence how much you can borrow.

1. Credit Scores: Personal and Business

Lenders typically only offer the highest loan amounts to business owners with good to excellent credit, since these borrowers represent a lower risk. A lender will typically want to look at both your personal and business credit scores.

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2. Collateral

Collateral is an asset (like equipment, real estate, or inventory) used to secure a loan. In the event that you cannot make loan payments, the collateral can be seized and resold to cover the remainder of the loan. While it’s possible to get a loan without collateral, you may be offered a lower amount, asked to pay more in interest, or both.

3. Debt-to-Income Ratio

Your debt-to-income ratio affects your monthly budget, which in turn can affect your ability to pay your debts each month. If the ratio is too high, a lender may either decline to work with you or offer you a lower loan amount.

4. Revenue

Generally speaking, the more money your business brings in each month and year, the more you will be able to borrow. Depending on the lender, you might need to bring in as much as 10 times the amount you want to borrow if you are applying without collateral.

5. Time in Business

The longer you’re in business, the more faith a lender will likely have in your company. Many small businesses fail each year, so if you’ve been in business for at least two years, you’ll likely have an easier time getting approved for a larger loan amount.

6. Down Payment

Making a down payment on a business loan proves you’re serious about the loan — and about paying it back. The larger a down payment you are able to make, generally the more a bank or lender will be willing to lend to your business.

7. Industry

Lenders will also often look at the type of industry your business falls under. If you’re in a field that is considered risky, associated with an unsteady cash flow, or not seen as socially acceptable, a lender may reject you or offer you a lower amount.

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Calculating How Much of a Business Loan You Need

When applying for a small business loan, you’ll want to consider not just how much of a loan they can get, but exactly how much of a loan you need. The reason: The more you borrow, generally, the more you’ll pay in interest and fees — and the higher your monthly cost will be.

Before you start applying for a small business loan, it can be a good idea to think carefully about what you would do if you could get access to extra capital, and then calculate exactly how much you would need to accomplish your goal. You may then want to add a little bit of padding to that amount to account for unexpected expenses.

You may even want to draw up a detailed plan (and budget) for how your company will use the funds and what impact you expect the money to have on your business growth. Some lenders will ask for this when you apply for the loan.

Recommended: How to Read Financial Statements: The Basics

Tips To Maximize Your Business Loan Amount

Here are some simple ways you may be able to qualify for more funds.

Make a Down Payment

Generally, the larger your down payment on the loan, the less risk you pose to a lender, and the more they will allow you to borrow.

Put up Collateral

By backing your loan with collateral, you present less risk to the lender, which means they will likely be willing to offer you a larger loan amount.

Look Into an SBA loan

If your business can meet the strict qualifications, SBA loans tend to come in larger amounts than other types of small business financing.

Reduce Your Debt

By paying off debts, you can likely improve your debt-to-income ratio and, in turn, increase the amount you can borrow.

Work on Building a Better Credit Profile

In general, the stronger your credit, the more money you will be able to borrow.

Wait a Year or So

If your business hasn’t been around for at least two years, you may want to hold off applying for a loan and put your efforts into building a good foundation for your business and increasing your revenue. In the future, this will allow you to borrow a larger amount.

Recommended: How Much Does It Cost to Start a Business?

The Takeaway

How large a loan you can get for your business ranges anywhere from $500 to over $5 million. The exact amount you will get approved for will depend on the lender (traditional banks and SBA-backed lenders tend to offer the largest loan amounts), the type of loan you’re applying for, as well as your qualifications (such as your credit score, time in business, and annual revenue).

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

How does the loan amount affect interest rates?

Higher loan amounts pose more risk for lenders, which can lead to higher interest rates. However, economies of scale can lower rates for substantial loans, as processing costs are spread over a larger amount, making the loan more profitable even with lower rates.

How does the loan amount affect other fees?

Many loans come with an origination fee, which is typically a percentage of the loan amount. The bigger the loan, the more you’ll pay in origination fees.

How are qualifications related to loan amounts?

Qualified borrowers are considered financially strong and good with their finances. Therefore, borrowers with strong credit profiles and solid revenue are generally able to get higher loan amounts.

How much money can you get for a business loan?

Business loans can range from as little as $500 to as much as $5 million.

Do banks give loans to start a business?

It’s uncommon for a bank to give a loan to a business that has not been producing revenue for at least a year and preferably two.

Photo credit: iStock/Edwin Tan

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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EBITDAR, which stands for earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs, is an operational efficiency metric. It’s often used by investors, lenders, and business owners to understand how well a company is performing from its primary business operations. It does this by adding back non-operational, non-recurring, and non-cash expenses to net income.

Here’s what you need to know about EBITDAR, including how to calculate it, how it’s used, and what it can tell you about your business.

What Is EBITDAR?

EBITDAR is a variation of EBITDA (earnings before interest, taxes, depreciation, and amortization), an accounting method that removes the effects of non-operational costs from net income. The only difference? EBITDAR also excludes restructuring and rental costs. (EBITDAR is also similar to adjusted EBITDA, which includes the removal of various one-time, irregular, and non-recurring items from EBITDA.)

By removing rental costs, investors can analyze companies that may have similar operations but that choose to access assets differently — some companies rent while others choose to own. Excluding rentals allows comparison of profits apples-to-apples.

EBITDAR is also an important measure if you are exploring business loans because it is often used by lenders to estimate the cash flows that a company has available for principal and interest payments.

Here’s a breakdown of each part of EBITDAR and why each variable is important.

Earnings: Earnings are the profit a business makes off of its core operations. With EBITDAR, earnings are calculated by subtracting expenses from total revenue. However, unlike net earnings, EBITDAR doesn’t subtract all business expenses. It factors in the cost of goods sold, general and administrative expenses, and other operating expenses, but doesn’t subtract costs that are not directly related to the company’s operations, namely interest paid on debt, amortization and depreciation expenses, income taxes, and the cost of restructuring or renting.

Interest: The interest a company pays on its loans is added back to net income with EBITDAR. The reasoning behind this is that while interest is an expense, it doesn’t reflect how well the company is utilizing its debt. Businesses take on different amounts of debt for different reasons and receive different interest rates based on a variety of factors (for example, credit score, existing debt, and collateral).

Taxes: Each locality has different tax laws. Depending on where a business is located, it may have a dramatically different tax burden than another company with the same amount in sales. To better compare companies, EBITDAR removes the effect of taxes on net income. This makes it easier to compare the performance of two or more companies operating in different states, cities, or counties.

Depreciation: Depreciation is the process of writing off the cost of a tangible asset over the course of its useful life. With EBITDAR, depreciation is added back to net income because depreciation depends on past investments the business has made and not on the company’s operating performance.

Amortization: Amortization is similar to depreciation, but is used to spread out the cost of intangible assets, such as patents, copyrights, trademarks, non-compete agreements, and software. These assets also have a limited useful life due to expiration. Amortization is added back to net income in EBITDAR because this expense isn’t directly related to a business’s core operations.

Restructuring costs: The restructuring of land or a building is an expense that doesn’t occur very often for most companies. And, many analysts view it as more of an investment that could potentially help the company generate additional revenue and profits. As a result, any costs associated with restructuring are added back to net income with EBITDAR to give analysts a better understanding of how well the central business model is performing.

Rental costs: Because rent can vary significantly from one location to the next, and is not within a business’s control, rent costs are added back to net income in EBITDAR. This allows for a better understanding of a company’s operating performance and potential. In addition, rent is a sunk cost, which means the expense is guaranteed to occur regardless of how a company performs.

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EBITDAR Formula

The standard formula for EBITDAR is:

EBITDAR = Net income + Interest + Taxes + Depreciation + Amortization + Restructuring or Rent Costs

An alternative formula:

EBITDAR = EBITDA + Restructuring/Rental Costs

where:

EBITDA = Earnings before interest, taxes, depreciation, and amortization

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How Does EBITDAR Work?

The premise of EBITDAR is that certain expenses can distract analysts from understanding how well a company is bringing in business. It only includes core operating expenses, and the following expenses are added back to net income:

•   Non-cash expenses

•   Non-recurring expenses

•   Non-operational expenses

Calculating EBITDAR

EBITDAR is a non-GAAP (generally accepted accounting principles) tool and does not appear on a company’s income statement. However, it can be calculated using information from the income statement.

To calculate EBITDAR, you need to know a company’s net income (the “bottom line” of an income statement), as well as exact numbers for interest paid on debt, taxes, depreciation and amortization expenses, and rent/restructuring costs. You then add these numbers back to net income to arrive at a company’s EBITDAR.

If you have a business’s EBITDA number, you can easily calculate EBITDAR by adding any rent or restructuring costs to the EBITDA number.

What EBITDAR Tells You

EBITDAR, rather than EBITDA, is primarily used to analyze the financial health and performance of companies that have gone through restructuring within the past year or have unique rent costs, such as restaurants, casinos, shipping companies, and airlines.

EBITDAR (like EBITDA) is also useful for measuring a company’s operating cash flow and for comparing the profitability of companies with different capital structures and in different tax brackets.

However, companies do have to pay interest, taxes, and rent, and must also account for depreciation and amortization. As a result, EBITDAR does not paint a complete picture or offer a true measure of how profitable a business is. In some cases, it can be used to hide poor choices. A company could use this metric to avoid showing things like high-interest loans or aging equipment that will be costly to replace.

Recommended: What is EBIDA?

Pros and Cons of Using EBITDAR

EBITDAR vs EBITDA

Example of EBITDAR

Here is the income statement for Company X for 2023:

To use Company X’s income statement to arrive at EBITDAR, you would add back interest ($20,000), taxes ($120,000), depreciation ($25,000), amortization ($15,000), and rent ($5,000) to arrive at an EBITDAR of $640,000 for 2023.

The Takeaway

EBITDAR, or earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs, is a valuation metric of a firm’s profitability without considering the tax rate and the capital structure of the company. It aims to measure a company’s profitability from its core operations.

While similar to EBITDA, EBITDAR goes a step further by removing the effects of rent or restructuring costs. This makes it a better tool for companies that have non-recurring or highly variable rent or restructuring costs, such as casinos and restaurants.

Calculating EBITDAR can be helpful for seeing how your business performs from one quarter or year to the next, as well as how it compares to other businesses in your industry. It may also come into play if you’re applying for a business loan. Banks and other lenders often look at EBITDAR (or EBITDA) when deciding whether your business is a risk they’re willing to take on.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

What is the difference between EBITDAR and EBITDA?

EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) and EBITDA (earnings before interest, taxes, depreciation, and amortization) are very similar metrics. The only difference is that with EBITDAR, restructuring or rental costs are also added back to net income.

Is EBITDAR the same thing as gross profit?

No. Gross profit is calculated by subtracting the cost of goods sold (COGS) from revenue. Unlike EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs), gross profit does not include non-production costs.

What is the formula for calculating EBITDAR?

To calculate EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs), you add certain non-recurring, non-operating, and non-cash expenses back to net income. The formula is: Net income + Interest + Taxes + Depreciation + Amortization + Restructuring/ Rental Costs = EBITDAR.

Photo credit: iStock/Inside Creative House

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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As a small business owner, it’s not always easy to tell exactly how well your business is doing or, after factoring in loans and expenses, how much of the business is really yours. That’s where a balance sheet comes in.

A balance sheet is a financial statement that shows the balance between your assets, liabilities, and equity. It can help you track the financial health of your small business and make informed decisions. You may also need a balance sheet to file taxes, secure a loan, bring in investors. or sell your business.

Read on to learn more about small business balance sheets, including what they are, what they look like, and how they can help you grow your business.

What Is a Balance Sheet?

A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It shows what the business owns (assets), what it owes (liabilities), and the difference between the two (owner’s equity). The balance sheet follows the fundamental accounting equation:

Assets = Liabilities + Owner’s Equity

Assets

Assets are resources that the business owns and can use to generate revenue. They are usually listed in order of liquidity, with the most liquid assets (e.g., cash) listed first. Examples of assets include:

•  Cash

•  Accounts receivable

•  Inventory (the value of goods held by the business for resale)

•  Property, plant, and equipment (the value of long-term assets such as buildings, machinery, and vehicles).

•  Investments (the value of investments held by the business, such as stocks or bonds)

Recommended: How Much Does It Cost to Start a Business?

Liabilities

Liabilities are obligations that the company owes to external parties. These include:

•  Long-term business loans

•  Short-term business loans

•  Accrued expenses

•  Deferred tax liability (accumulated taxes that have not yet been paid)

•  Accounts payable

Equity

Owner’s equity represents the owner’s stake in the business. It is calculated as the difference between the company’s assets and liabilities and represents the amount of the company’s assets that are owned by the owner or shareholders.

This part of the balance sheet also includes retained earnings. Retained earnings represent the cumulative net income of the company that has been retained in the business rather than distributed to shareholders as dividends.

Income Statement vs Balance Sheet

Both balance sheets and income statements offer valuable information on a company’s financial health, but they differ in a few key ways.

An income statement (also known as a profit and loss statement), is a financial statement that summarizes a company’s revenues, expenses, and profits or losses over a specific period, typically a quarter or a year.

An income statement provides insight into your company’s financial performance by showing how much money the company made (revenue), how much it spent (expenses), and the resulting profit or loss. This information is also important to investors and lenders, since it indicates if the company was profitable during the given time.

A balance sheet, by contrast, shows a company’s financial health at a specific point in time. Creditors and investors look at a company’s balance sheet to understand what the company owns (assets) and owes (liabilities). The balance between those two items communicates the company’s financial health.

Here’s a side-by-side comparison of income statements and balance sheets:

Recommended: How to Read Financial Statements: The Basics

Do Small Businesses Need a Balance Sheet?

If your company brings in revenues of more than $250,000, the Internal Revenue Service (IRS) may require you to complete a small business balance sheet when you file your taxes. If your company makes less than that, it’s not required.

However, if you want to take out a small business loan, lenders may ask to see your balance sheet when you apply. If you’re looking to bring in investors or plan to sell your company, you’ll also likely need a balance sheet.

If none of those apply, it can still be wise to have a balance sheet, as it lets you know at a glance where your business stands in terms of what it owns, and what it owes.

A balance sheet also offers a scannable list of assets and liabilities for comparison, so you can make sure your business is able to cover its short-term obligations. If you see that liabilities outweigh assets, you’ll need to find ways to increase revenue or raise working capital, either from investors or through financing.

Recommended: Typical Small Business Loan Fees

Writing a Balance Sheet for a Small Business

Ready to create a simple balance sheet for your small business’s use? You have a few options.

Start With What You’ve Got

If you already use small business accounting software, you may have the ability to create a balance sheet statement directly from that software. These programs can typically build the balance sheet for you by automatically filling in all relevant assets and liabilities, often using real-time information from your bank accounts.

Ask Your Accountant

If you have an accountant who manages your “books” and files your taxes, they can help you generate a balance sheet and explain how it works.

DIY Your Balance Sheet

If the other two aren’t options, you can generate your own balance sheet. There are templates you can find online to use, or you can create one in a spreadsheet. Make sure to include your current and fixed assets, current and long-term liabilities, and any money you (or others) have invested in the company.

Small Business Balance Sheet Example

Let’s look at an example of a balance sheet for a fictional small business so you get a sense of what yours might look like.

This sample balance sheet is in balance, since total assets ($93,500) equals total liabilities ($73,500) plus total equity ($20,000).

Recommended: Gross Profit vs EBITDA

Pro Forma Balance Sheet

Pro forma financial statements are financial reports for your business based on hypothetical scenarios. As a result, they allow you to test out situations you think may happen in the future to help you make business decisions.

A pro forma balance sheet is a balance sheet with forecasted future values — namely the assets, liabilities, and equity you wish to have in the future. These balance sheets can be useful for planning any significant changes to the business, whether you’re thinking about taking out a new loan, purchasing a large piece of equipment, or even buying another company.

Recommended: Debit Memo vs Credit Memo

The Takeaway

The balance sheet is a critical financial statement that provides valuable information about a company’s financial position. No matter how big or small your business is, it’s a good idea to periodically generate and review the balance sheet to keep tabs on your company’s financial health and make informed decisions. By understanding the balance sheet, you can better manage your finances and position your business for long-term success.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

See funding options

Photo credit: iStock/stockphotodirectors

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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As a business owner, it is important to know the difference between working capital and changes in working capital. Working capital tells you the level of assets your business has available to meet its short-term obligations at a given moment in time. Change in working capital, on the other hand, measures what is happening over a given period of time with regard to the liquidity of your company.

Changes in working capital are important to monitor and are often used by investors and lenders to assess the health and value of a business. Read on to learn what causes a change in working capital, how to to calculate changes in working capital, and what these changes can tell you about your business.

What Is Working Capital?

Working capital is a company’s current assets minus its current liabilities. Both current assets and current liabilities are found on a company’s balance sheet.

Current assets include assets a company will use in fewer than 12 months in its business operations, such as cash, accounts receivable, and inventories of raw materials and finished goods. Current liabilities include accounts payable, trade credit, short-terms loans, and lines of credit. Essentially, working capital is the amount of money a company has available to pay its short-term expenses.

Positive Working Capital

A business has positive working capital when it currently has more current assets than current liabilities. This is a sign of financial health, since it means the company will be able to fully cover its short-term obligations as they come due over the next year.

It’s possible to have too much of a good thing, however. Excessive working capital for a prolonged period of time can mean a company is not effectively managing its assets.

Recommended: Cash and Cash Equivalents, Explained

Negative Working Capital

A business has negative working capital when it currently has more liabilities than assets. This can be a temporary situation, such as when a company makes a large payment to a vendor. However, if working capital stays negative for an extended period, it can indicate that the company is struggling to make ends meet and may need to borrow money or find another way to finance their working capital.

Another way to measure working capital is to look at the working capital ratio, which is current assets divided by current liabilities. Generally, a working capital ratio of less than 1.0 is an indicator of liquidity problems, while a ratio higher than 2.0 indicates good liquidity.

Recommended: What to Know About Short-Term Business Loans

What Is Net Working Capital?

Net working capital is simply another name for working capital. It is a basic accounting formula companies use to determine their short-term financial health. The basic formula is:

Current Assets – Current Liabilities = Net Working Capital (or Working Capital)

What Are Changes in Net Working Capital?

Changes in net working capital refers to how a company’s net working capital fluctuates year-over- year. If your net working capital one year was $50,000 and the next year it was $75,000, you would have a positive net working capital change of $25,000.

What Causes Changes in Working Capital?

There are a number of factors that can cause a change in working capital. These include:

Credit Policy

Credit policy adjustments often lead to changes in how quickly cash comes in. A tighter, stricter policy reduces accounts receivable and, in turn, frees up cash. That comes at a potential cost of lower net sales since buyers may shy away from a firm that has highly strict credit policies. Looser credit policies can have the opposite effect. As with many of these factors, there is a tradeoff to weigh.

Accounts Payable Payment Period

Negotiating a longer accounts payable period with your suppliers frees up cash because you have more time to pay your bills.The downside is that a supplier might increase prices in response to allowing a longer payment period. Shortening your accounts payable period can have the opposite effect, so business owners will want to carefully manage this policy.

Collection Policy

A company’s collection policy is a written document that includes the protocol for tackling owed debts. If you’re seeking to increase liquidity, a stricter collection policy could help. Cash comes in sooner (and total accounts receivable shrinks) when there is a short window within which customers can hold off on paying. A less aggressive collection policy has the opposite impact.

Growth Rate

Stronger growth calls for greater investment in accounts receivable and inventory, which uses up cash. This, in turn, can lead to major changes in working capital from one month to the next. A slower growth rate can reduce changes in net working capital.

Inventory Planning

Inventory decisions are a crucial factor that can lead to a change in working capital. If a company chooses to spend more on inventory to increase its fulfillment rate, it will use up more cash. Reducing inventory has the opposite effect.

Purchasing Practices

A change in purchasing practices can also lead to changes in working capital. If the purchasing department opts to buy larger quantities at one time, it can lower unit prices. However, it means a higher outlay of cash. Buying in smaller amounts can have the opposite effect.

Hedging

Using hedging strategies to offset swings in cash flow can mitigate unexpected changes in working capital. However, there are some costs involved in these hedging transactions, which could affect cash flow.

Recommended: Variable Costing Income Statements

What Impacts Can Various Changes in Working Capital Have?

Change in working capital is the change in the net working capital of the company from one accounting period to the next. This will happen when either current assets or current liabilities increase or decrease in value.

Change in net working capital is an important indicator of a company’s financial performance and liquidity over time. By calculating the change in working capital, you can better understand your company’s capital cycle and strategize ways to reduce it, either by collecting receivables sooner or, possibly, by delaying accounts payable.

Understanding changes in cash flow is also important if you are applying for a small business loan. Lenders will often look closely at a potential borrower’s working capital and change in working capital from quarter-to-quarter or year-to-year.

Positive Impacts

If the change in working capital is positive, then the change in current liabilities has increased more than the current assets. This means the company’s liquidity is increasing.

Negative Impacts

If the change in working capital is negative, it means that the change in the current operating assets has increased more than the current operating liabilities. Cash has been used, and this reduces liquidity.

Calculating Change in Working Capital

The change in working capital formula is straightforward once you know your balance sheet. Simply take current assets and subtract current liabilities. That difference is your working capital (WC). Next, compare the firm’s working capital in the current period and subtract the working capital amount from the previous period. That difference is the change in working capital.

Change in WC = Current year WC – Last year WC

How to Calculate Changes in Net Working Capital

As an example, let’s say in 2023 your working capital was $75,000. In 2022, your working capital was $50,000. Using the formula above, we have:

Change in WC = $75,000 – $50,000 = $25,000

You can then use this figure to better understand your company’s health. If your firm experiences a positive change in net working capital, it may have more cash to invest in growth opportunities or repay debt. If it experiences a negative change, on the other hand, it can indicate that your company is struggling to meet its short-term obligations.

Why Calculating Changes in Working Capital Is Important

As a small business owner, monitoring and understanding changes in working capital over time, whether it’s quarter-over-quarter or year-over-year, can help you better understand your company’s cash flow.

Working capital is also important if you are trying to woo an investor or get approved for a small business loan. Lenders and investors will often look at both working capital and changes in working capital to assess a company’s financial health. Wide swings from positive to negative working capital can offer clues about a company’s business practices. A business owner can often access more attractive small business loan rates and terms when the firm has a consistent working capital policy.

Recommended: Typical Small Business Loan Fees

The Takeaway

Working capital is a basic accounting formula (current assets minus current liabilities) business owners use to determine their short-term financial health. Changes in working capital can occur when either current assets or current liabilities increase or decrease in value.

As a business owner, it’s important to calculate working capital and changes in working capital from one accounting period to another to clearly assess your company’s operational efficiency. This is especially important if you are in the market for financing. Lenders will often look at changes in working capital when assessing a company’s management style and operational efficiency.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

How is change in working capital calculated?

To calculate change in working capital, you first subtract the company’s current liabilities from the company’s current assets to get current working capital. You then take last year’s working capital number and subtract it from this year’s working capital to get change in working capital.

What are some things that can affect working capital?

Items affecting working capital include any changes in current assets and current liabilities. Current assets include: cash (and cash equivalents), marketable securities, inventory, accounts receivable, and prepaid expenses. Current liabilities include: accounts payable, short-term debt (and the current portion of long-term debt), dividends payable, current deferred revenue liability, and income tax owed within the next year.

What changes in working capital impact cash flow?

Any change in working capital can affect cash flow, which is the net amount of cash and cash-equivalents being transferred in and out of a company. If the change in working capital is negative, it reduces cash flow. If the change in working capital is positive, it increases cash flow.

Photo credit: iStock/Hispanolistic

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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