Financial projections for a business loan

What do lenders want in financial projections for a business plan?

A 12 month cash flow by month, three years of profit and loss by year, a projected balance sheet, and an assumptions page. Banks and SBA lenders want all four for startups, acquisitions and larger loans; for an established business borrowing within its history, many accept the cash flow and the profit and loss. Online lenders rarely ask for projections.

The cash flow is read first, because it shows whether the loan payment fits each month, not just on average. The profit and loss shows the trend, the balance sheet shows what the business owns and owes after the loan, and the assumptions page is where you earn or lose trust. Keep the four consistent; an underwriter cross checks them. In an SBA business plan template, they go in the final section.

How do you build revenue assumptions bottom up?

Start from units, not from a growth rate. Revenue equals customers times what each pays times how often, capped by what you can physically deliver: for a restaurant, seats, turns per day, average check and days open. Compare the result with last year's bank deposits; if it is more than 20% to 30% higher, you need a reason the lender can see, such as a signed contract or the equipment the loan buys. Take seasonality from your own statements.

Startup financial projections use the same method with capacity and a ramp: month one at a fraction of capacity, climbing to a steady state by month nine to twelve, with the owner injection as cash in during month one. Keep the ramp modest; lenders discount startup revenue by habit, and many startups do better with a startup business loan sized to the projection.

What goes in a cash flow projection template?

Opening cash, cash in, cash out and closing cash, for each of 12 months, with closing cash never going negative. Cash in is sales actually collected, not invoiced, plus the loan proceeds in the month they land and any owner injection. Cash out is cost of goods, payroll and payroll taxes, rent, utilities, insurance, marketing, existing and new loan payments, owner draw, income taxes and equipment purchases.

The gap between invoicing and collecting matters: if customers pay in 45 days, January sales are March cash. The financial projections builder lays out these lines for 12 months and handles the collection lag and the loan payment for you. A lender looks at the lowest closing balance, which is your cushion, and whether cash in covers the payment from the month it starts.

How do you show the loan payment and DSCR inside the projection?

Give the new loan payment its own line in both the cash flow and the profit and loss, and show the coverage ratio with the formula on the assumptions page. Compute the payment with the business loan calculator; for an SBA loan, use a rate near current prime plus the SBA spread, and say so.

Debt service coverage is annual cash available for debt payments divided by annual payments on every business loan including the new one. Cash available is usually net profit plus interest, depreciation and amortization, less owner draws in some lenders' formulas. Show the arithmetic: $180,000 of cash available divided by $130,000 of annual payments is 1.38. Most banks want 1.25 or higher and SBA lenders 1.15; see DSCR explained and the DSCR calculator. Show the ratio for every projected year.

What reasonableness checks do underwriters run?

They compare your projections with your history and your industry, and anything that stands out gets a question or a haircut. The usual checks:

• Year one revenue against last year's tax return and deposits; more than 20% to 30% growth needs a visible cause.
• Gross margin against your prior years and the industry norm; a five point jump without a price change is a flag.
• Payroll, rent and marketing as a share of revenue, held steady unless explained.
• Collections consistent with your receivables aging.
• Owner compensation you can actually live on; an unrealistic draw hides a coverage problem.
• Taxes included, and coverage above the floor in every year.

Underwriters often rerun the projection with revenue 10% to 20% lower to see whether coverage holds. Run that case yourself and put it in the appendix.

What should the assumptions page say?

One line per material number: what it is, how you arrived at it, and the source. "Revenue: 2025 actual of $820,000 from the tax return, plus $140,000 from the signed contract attached, no other growth." "Rent: $6,500 per month per the lease, fixed through 2028." "Loan payment: $250,000 at 10.5% over ten years, $3,373 per month, from the lender's quote." That page lets an underwriter accept your numbers without a phone call.

Include the growth rate and why, the gross margin and its basis, the collection lag, the start month of the loan payment, and the tax rate. A financial projections template without an assumptions page forces the lender to guess, and lenders guess downward.

Can AI build the projections, and what should you check?

AI can structure, check and explain projections; it should not invent them. Build the numbers in a spreadsheet or the financial projections builder, then paste the result into Claude or ChatGPT and ask it to find the weakest assumption, recompute the coverage and draft the assumptions page. The prompts guide has the exact prompt.

Check by hand that year one ties to your last tax return, that the payment matches the calculator, that sources equal uses, and that coverage clears the floor in every year. Then apply here, or ask your AI assistant to apply for you through our MCP server: it attaches the projections with your statements and tax returns, fills the application and submits with your approval. See the agents hub.