LTM (last twelve months) and TTM (trailing twelve months) mean the same thing: results for the twelve months ending on the most recent month- or quarter-end, whatever the fiscal year. It is calculated as the last full fiscal year, plus the current year to date, minus the same period of the prior year. Lenders size loans on LTM because it is the most recent full year of results and includes every season once. After closing, covenants are usually tested each quarter on the LTM ending that quarter, so each quarter's results stay in the test for four quarters.
- Stands for
- Last twelve months / trailing twelve months (same thing)
- Formula
- Last fiscal year + current year to date − prior year to date
- Used for
- Loan sizing, leverage and coverage ratios, covenant tests
- Covenant rhythm
- Tested each quarter on the twelve months ending that quarter
- What it needs
- Accrual-basis monthly or quarterly statements with prior-year comparatives
How LTM is calculated
You rarely need twelve separate monthly statements to build an LTM figure. The standard shortcut uses documents a business already has:
LTM = last full fiscal year + current year to date − same period of the prior year.
Take a business with a December year-end. Its EBITDA for fiscal 2025 was 1,000. For the six months to June 2026 it earned 650, against 450 in the six months to June 2025.
| Piece | EBITDA |
|---|---|
| Fiscal year to December 2025 | 1,000 |
| Plus: January to June 2026 | 650 |
| Less: January to June 2025 | 450 |
| LTM to June 2026 | 1,200 |
The formula only works if the year-to-date figures are prepared the same way as the annual ones. If the annual statements include year-end adjustments that the monthly books do not (an inventory count, accrued bonuses, a true-up of payables), the interim periods will overstate earnings and so will the LTM. Lenders know this pattern and will ask whether the interim figures have been closed with the same care; see accrual vs cash basis and reviewed, audited and compiled statements.
Why lenders underwrite to LTM, not the last fiscal year
A fiscal year can be up to a year old by the time a loan is underwritten. Lenders want the most recent full year of results, and LTM gives it to them without waiting. It also keeps every season in the figure exactly once, which is why lenders prefer it to simply multiplying a recent quarter by four: a landscaping company's summer quarter or a retailer's holiday quarter, annualized, describes a year that never happens.
Using the example above, the difference between fiscal-year and LTM figures carries straight through to loan size.
| Measured on | EBITDA | Debt service supported at 1.25x coverage | Senior debt at three times EBITDA |
|---|---|---|---|
| Fiscal year 2025 | 1,000 | 800 | 3,000 |
| LTM to June 2026 | 1,200 | 960 | 3,600 |
The stronger first half adds a fifth to the debt the business can carry. But a lender will not credit it automatically. The credit team will ask why the half was stronger: a price increase that has held, a new customer on contract, or one large job that will not repeat. Growth that is recurring and documented earns the LTM figure. A one-off inflates it, and the lender will normalize it out the way it would any other one-time item; see EBITDA add-backs, which work in both directions.
A strong recent quarter raises LTM. The lender's question is whether the next quarter will look like it.
How quarterly test periods roll
After closing, most cash-flow covenants, such as the leverage ratio and the fixed charge coverage ratio, are tested at each quarter-end on the four quarters just ended. Each new quarter enters the window and the same quarter a year earlier drops out. The consequence: a bad quarter stays in the test for four consecutive quarters.
| Test date | Quarter's EBITDA | LTM EBITDA |
|---|---|---|
| December 2025 | 250 | 1,000 |
| March 2026 (weak quarter) | 100 | 850 |
| June 2026 | 250 | 850 |
| September 2026 | 250 | 850 |
| December 2026 | 250 | 850 |
| March 2027 (weak quarter drops out) | 250 | 1,000 |
The business recovered in the second quarter, but its LTM EBITDA stays 150 below where it was for a full year, measured against a covenant that does not move. That is why covenant headroom should be modeled against a single bad quarter as well as a bad year, and why the first test dates after closing deserve attention. An agreement with an equity cure will usually say that a cure amount counts in the quarter it cures and in the following three tests, for the same reason.
Early in a loan, before four quarters have passed since closing, agreements often build the LTM from the pre-closing results, or annualize the quarters since closing. Which one applies is set in the credit agreement, and it matters most on acquisitions, where the pre-closing figures are the target's under its former owner.
LTM on an acquisition
On an acquisition, lenders build LTM for every company in the deal to the same end date and combine them into pro forma EBITDA. That requires the target's latest full fiscal year and current year-to-date figures, with the prior-year comparative for the same months. An older year never substitutes for missing recent figures. Sellers whose monthly books are thin may need their accountant to close the interim period properly before a lender will rely on it; see when the seller's statements and tax returns don't match.
SBA lenders anchor to tax returns for full years and use a year-to-date P&L through the last month-end to show the trend since. From 1 October 2026 (SOP 50 10 8.1), a change of ownership must show 1.25x debt service coverage on historical results. See debt service coverage ratio.
What to have ready
- The last two or three full fiscal years of statements, and business tax returns that tie to them.
- A year-to-date P&L and balance sheet through the last month-end, with the same period of the prior year beside it.
- An explanation of anything unusual in the recent months: a large job, a price change, a lost customer, a one-time cost.
- For a covenant-tested loan, quarterly statements produced on the schedule the agreement sets, with the compliance certificate.
Transparent's financing model computes LTM from the documents as delivered, flags a year-to-date figure that looks unclosed, and shows the lender both the fiscal-year and LTM view so the recent trend is explained before it is questioned.
Common questions
- Is there a difference between LTM and TTM?
- No. Both mean the twelve months ending on the latest month- or quarter-end. LTM is more common in credit agreements and term sheets; TTM is more common in investor and financial-data reporting.
- Why would a lender use LTM instead of my tax return?
- Because the tax return may be many months old. Lenders still use tax returns to verify the full years, and LTM to see how the business is performing now.
- Is LTM the same as annualizing my latest quarter?
- No. Annualizing multiplies one quarter by four and exaggerates any seasonality. LTM uses twelve actual months, so each season appears once.
- How long does a bad quarter affect my covenant tests?
- Four quarterly tests: the quarter it happens and the next three, until it drops out of the twelve-month window.
- Can I use LTM through last month rather than last quarter?
- For sizing a new loan, lenders usually want the latest month-end available. For covenant tests after closing, the agreement fixes the dates, usually quarter-ends.