How to create financial projections for an SBA loan

Applying for an SBA loan requires more than just a strong business idea. Lenders want to see detailed financial projections that prove your ability to repay debt while keeping your business running smoothly. In this guide, we’ll walk step-by-step through creating SBA-ready projections that impress underwriters and give you confidence in your numbers.

If you don’t want to start from scratch, you can download a QuickBizModels Financial Projection Template. Our templates are SBA-ready with built-in 5-year statements, DSCR tracking, break-even analysis, and scenario toggles.

What Lenders Expect to See

• Sources and Uses of funds that balance
• Monthly projections for 24 months, then annual to Year 5
• A revenue model tied to capacity (units × price × utilization)
• Detailed COGS, payroll with taxes and benefits, and operating costs
• A debt schedule with Debt Service Coverage Ratio (DSCR)
• Cash flow that stays positive, or a plan if it doesn’t
• Scenario analysis with Base, Downside, and Upside cases

1) Sources and Uses

Start with a simple table that explains exactly how the loan and equity will be spent. Uses typically include buildout, equipment, furniture, inventory, marketing, and working capital. Sources include the SBA loan, your cash injection, and any grants or vendor financing. Make sure the totals match.

2) A Credible Revenue Engine

Drive revenue using units × price × utilization. This approach is transparent and shows lenders you understand your capacity limits.

• Retail example (coffee shop): transactions per hour × hours open × days × average ticket
• Service example (fitness studio): classes per week × average attendance × price

3) COGS and Gross Margin

Either calculate COGS as a percentage of sales or as units × unit cost. Track your gross margin percentage monthly and explain how it stabilizes.

4) Payroll with Burden

Lenders expect to see realistic payroll that includes employer taxes and benefits.

Loaded_Wage = Base_Wage × (1 + Taxes% + Benefits%)

Break out hourly frontline staff, salaried management, and owner’s salary separately.

5) Operating Expenses

• Fixed: rent, insurance, software, accounting
• Variable: marketing, supplies, delivery fees

6) Startup Costs and Depreciation

List equipment, leasehold improvements, and furniture as assets. Use straight-line depreciation across useful lives. This shows long-term planning.

7) Working Capital

Even profitable businesses can run out of cash if receivables, payables, and inventory aren’t modeled. Use DSO (days sales outstanding), DPO (days payable), and DIO (days inventory outstanding).

Ending_Inventory = Beginning_Inventory + Purchases - COGS

8) Debt Schedule

Model your loan terms: amount, interest, amortization. Use Excel’s PMT, IPMT, and PPMT functions to separate principal and interest.

9) Three-Statement Integration

Tie together your Income Statement, Balance Sheet, and Cash Flow. Highlight your DSCR (EBITDA ÷ debt payments) each year—this is a key lender metric.

10) Break-Even and Unit Economics

Show when the business covers fixed costs and how many units are needed to do so.

BreakEven_Units = Fixed_Costs / Contribution_Margin

11) Scenarios

Always include at least three cases: Base, Downside, and Upside. Adjust demand, pricing, and expenses to show the range of outcomes.

12) Common Mistakes

• Ignoring payroll taxes and benefits
• Top-down revenue (“1% of market”)
• Underestimating working capital needs
• Forgetting principal in DSCR
• Hardcoding instead of using driver-based inputs

13) Example Inputs

• Transactions/hour: 8 → 12 by Month 12
• Average ticket: $12, 3% annual growth
• COGS: 35% of sales
• Rent: $3,800/month with 3% escalation
• Loan: $275,000, 10-year amortization

14) Lender-Friendly Checklist

• Clear assumptions sheet(s)
• Balanced sources and uses
• At least 24 months monthly, 5 years annual
• Revenue tied to capacity
• Payroll with taxes and benefits
• Working capital modeled
• Debt schedule and DSCR highlighted
• Scenario analysis included

Final Takeaway

Strong SBA loan projections are about being realistic, not flashy. Document your assumptions, prove you can service debt, and keep cash flow positive. To save time, download a QuickBizModels SBA Loan Template— already built with 5-year statements, SBA-ready cash flow, DSCR tracking, and break-even analysis.