Write a Business Plan That Gets You Funded

What Lenders Really Want in a Business Plan

When it comes to securing funding for your small business, a great idea isn't enough. U.S. lenders and SBA loan programs need more than passion—they want proof. Whether you're applying for a traditional bank loan or seeking assistance through the SBA's 7(a) or Microloan programs, your business plan must demonstrate that you understand your market, can manage your finances, and most importantly, can repay the loan.

Know Your Audience: How Lenders and the SBA Evaluate

Before diving into the numbers, it's critical to understand how banks and SBA-approved lenders assess your business. Unlike investors who may take big risks for high returns, lenders are conservative. They want to know that your business has a reliable path to stable income and that you have a plan to repay the debt.

a. SBA 7(a) Loan

• Up to $5 million
• Used for working capital, equipment, inventory, or even refinancing
• Requires good personal credit (typically 680+), a solid business plan, and a reasonable down payment

b. SBA Microloan

• Up to $50,000
• Targeted at startups, minority-owned businesses, and underserved communities
• Often includes mandatory business training or technical assistance

Pro Tip: Lenders look for responsible borrowers. Show that you've invested your own capital and have a clear, focused use of loan funds.

The Lender-Ready Business Plan Blueprint

Lenders don't just skim the financials—they dissect them. Here are the key elements they expect:

1. Realistic and Justified Projections

Provide 12 to 36 months of projected revenue, broken down monthly or quarterly. Use conservative estimates and back them with logic or data:

• Show how you will acquire customers
• Reference industry benchmarks or comparable businesses
• Avoid "hockey-stick" growth unless it’s clearly justified

2. Break-Even Analysis

This tells lenders when your business will start turning a profit. Include:

• Fixed costs
• Variable costs per unit
• Sales needed to cover costs
• Cash Flow Statement

Liquidity is more important to lenders than long-term profitability. A cash flow statement should:

• Cover at least the first 12 months
• Highlight when loan repayments begin
• Identify periods of negative cash flow and explain how you’ll cover them

3. Red Flags That Kill Loan Applications

Even a well-written business plan can be rejected if it contains certain red flags. Avoid the following:

• Overly optimistic sales projections
• Vague marketing strategy ("We'll use social media" isn’t enough)
• No personal investment or "skin in the game"
• Unclear or generic use of funds
• Missing repayment plan or debt service coverage rate

Make sure your plan includes: Personal capital contribution; Specific loan use (e.g., "$20,000 for inventory purchase"); Contingency plan in case revenue falls short.

4. Crafting a Financial Narrative That Builds Trust

Your numbers must tell a story. A compelling financial narrative helps lenders understand not just what you project, but why you believe in those numbers.

Key questions to answer:

• How did you arrive at your pricing?
• What are your customer acquisition costs and assumptions?
• How do your margins compare to others in the industry?

Remember: lenders bet on consistency and financial discipline, not just potential.

Financial Ratios That Impress Lenders

Include these key ratios in your financial section to show your business is financially sound:

1. Debt Service Coverage Ratio (Ability to repay the loan): 1.25 or higher
2. Current Ratio (Liquidity and short-term health): 1.2 to 2.0
3. Gross Margin (Profit before overhead): 30% to 60%
4. Break-even Point (When revenue covers all costs): Industry-specific
5. Owner's Equity to Total Assets (Your own financial commitment): >20% preferred

Consider linking these ratios to visuals or include a downloadable calculator to help readers crunch their own numbers.

5. SBA-Specific Add-Ons

SBA loans come with a few extra paperwork requirements. Your business plan should reference:

• SBA Form 413: Personal financial statement
• Use of Proceeds Table: A line-item breakdown of how you’ll spend the loan
• Resumes or bios of owners and key staff

Also mention any applicable certifications or support programs (e.g., for women-, veteran-, or minority-owned businesses).

Conclusion: Your Plan is Your Proof

A strong business plan doesn't just explain your business—it proves you’re a low-risk borrower. Focus on clarity, realism, and responsibility. Align your projections with lender expectations, and back up every number with logic.

Need help? Check out our SBA Loan Business Plan Tips to make sure your plan includes everything lenders want to see.