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What financial projections does an SBA lender want?

Updated 2026-11-10

Short answer: For a 7(a) Small loan (up to $350,000), SBA requires 12 months of projections with written assumptions that show a debt service coverage ratio (DSCR) of at least 1.10 within one year of funding. For a standard 7(a) loan above $350,000, or a start-up, the projections run two years and must show at least 1.15. A start-up also needs an owner equity injection of at least 10% of total project costs.

The numbers below come from SBA's lender rulebook, SOP 50 10 8.1, which applies to applications that receive an SBA loan number on or after October 1, 2026 (SBA Information Notice 5000-880695). The SOP is written for lenders, but it is the checklist your banker is working from. Individual banks can ask for more.

What each SBA loan type requires

The 1.10 test for 7(a) Small loans took effect March 1, 2026, when SBA dropped the SBSS credit score and told lenders to use ordinary commercial credit analysis instead (SBA Procedural Notice 5000-876777). SOP 50 10 8.1 carries the same rule forward.

Projection length and detail

The SOP sets a minimum, not a format. For 7(a) Small loans the lender needs 12-month projections "including supporting assumptions." For standard 7(a) loans, start-ups and other applications based on projections, the lender needs "detailed projections, including the supporting assumptions" that reflect a DSCR of at least 1.15 within two years of funding (SOP 50 10 8.1, Section B, Chapter 1).

SBA's own business plan guidance goes further. It suggests a five-year outlook with income statements, balance sheets, cash flow statements and capital expenditure budgets, and says that for the first year you should use quarterly or even monthly figures (SBA).

The practical package most owners build:

• Monthly income statement and cash flow for year one.
• Annual figures for years two and three, or quarterly if the business is seasonal.
• A balance sheet at opening and at the end of each year.
• A debt schedule showing the new loan plus every existing obligation.

The SOP does not require monthly detail, so ask your lender what it prefers. A monthly year one is the safer default because it shows when cash runs low, which an annual view hides.

Assumptions the lender must be able to defend

For standard 7(a) loans, the lender has to support the projected cash flow with assumptions covering revenue growth (new product lines, sales channels, facilities), any cut in expenses, and a comparison to current industry trends. Projected rental income from the project property cannot be counted in the debt service coverage test.

Write each assumption so a stranger can check it:

• Revenue: customers per day or jobs per week, times average ticket, with the source (your lease location traffic, a comparable business, a signed contract).
• Cost of goods and labor: a percentage or an hourly rate, not a lump sum.
• Ramp-up: how long until you reach full volume, and why.
• Owner pay: a real salary. Lenders adjust cash flow for owner draws, so leaving it out will be caught.

A break-even analysis belongs here too. SBA calls it an important part of any plan shown to a lender or investor.

DSCR minimums

DSCR is operating cash flow divided by debt service. SBA defines operating cash flow as EBITDA (earnings before interest, taxes, depreciation and amortization), and debt service as the future required principal and interest payments on all business debt, including the new SBA loan. The full method is in our DSCR guide, and you can run your own numbers in the DSCR calculator.

The SBA minimums are floors. Lender guides report that SBA lenders often aim for about 1.25 as a cushion (GoSBALoans). Treat 1.25 as the target and 1.10 or 1.15 as the line below which a loan cannot be approved. For 7(a) loans that buy a business, SBA sets higher DSCR tests by transaction type, with 1.25 for an initial acquisition (SOP 50 10 8.1, Appendix 15).

A loan that misses the 7(a) Small test is not necessarily dead. The SOP says it must then be processed as a standard 7(a) or an SBA Express loan.

Owner equity injection

SBA treats a business as a start-up if it has been generating revenue from its intended operations for one year or less. A start-up 7(a) loan requires an equity injection of at least 10% of total project costs, meaning all costs needed to become operational, whatever their source, except lines of credit and 504 loans (SOP 50 10 8.1, Section B, Chapter 2). Loans approved more than 90 days apart count as separate projects.

What counts as equity:

• Cash that is not borrowed.
• Cash from a personal loan, if you can show repayment from a source other than the business. Your salary from the business does not qualify.
• Debt on full standby, with no payments of principal or interest for the life of the 7(a) loan.
• Grants without repayment or clawback terms.
• Verified prepaid expenses and, with an independent valuation where needed, assets other than cash.

For SBA Express loans, the equity decision is left to the lender's business judgment. For 504 loans, the borrower contributes at least 10%, and new businesses at least 15%. Special-purpose properties raise it further.

Sources and uses

Every request needs a table showing where the money comes from and where it goes, and the two columns must match. It is also where the 10% injection is calculated. For loans above $50,000 where half or more of the proceeds is working capital, the lender must explain in its credit memo why that much is necessary, so keep working capital tied to a monthly cash need. Our guide to sources and uses of funds walks through an example table.

Before you submit

1. Confirm your loan type and size with the lender, then match the projection length to it.
2. Build the model from the financial projection template rather than from a blank sheet, and keep every assumption on one visible tab.
3. Check that DSCR clears the minimum with room to spare, not by a rounding error.
4. Match the sources and uses table to your equity injection.
5. Ask whether your lender wants its own forms in addition to your model. SBA lenders use their own formats.

This guide is general information. Approval depends on your credit, collateral and the lender's own policy, and your lender has the final say on what it needs.

Next step

Start from a model that already lays out monthly year one, annual years two and three, a debt schedule and a DSCR check, then replace the sample numbers with yours. Get the financial projection templates.