How do you write a business plan for a loan?

What Lenders Actually Read in a Business Plan

Most lenders spend less than five minutes on a business plan during initial review. They are looking for one thing: confidence that the business can repay the loan. The SBA's business plan guidance at sba.gov identifies the core components lenders need: an executive summary, company description, market analysis, organization and management structure, products or services description, marketing and sales strategy, and financial projections. Of these, the executive summary and financial projections carry the most weight in a loan decision. The SBA's Standard Operating Procedure 50 10 specifies that SBA lenders must evaluate business purpose, management experience, and repayment ability — all three of which the business plan must address clearly and concisely.

The Executive Summary: Your First Two Minutes

The executive summary is the most important page in a loan-bound business plan. It should be one to two pages and answer: (1) What does the business do and how long has it operated? (2) What is the loan amount and what will it be used for specifically? (3) What is the current annual revenue and is it growing? (4) Who is the owner/operator and what is their relevant experience? (5) How will the loan be repaid — what is the projected DSCR after the loan? Keep every sentence relevant to repayment. Lenders do not need your mission statement, your founding story, or your five-year vision — they need proof of repayment capacity. According to the Federal Reserve's 2026 Small Business Credit Survey, businesses with $1M–$10M in annual revenue were fully approved for financing 61% of the time versus just 37% for businesses under $100K in revenue, and firms operating 21+ years were approved at 63% versus 48% for firms 0–5 years old — documented revenue size and operating history are among the strongest predictors of full approval, which is exactly what the executive summary needs to establish up front.

Financial Projections: What to Include and How to Build Them

For an existing business seeking a loan, financial projections should include: (1) Historical financials — 2 years of income statements and balance sheets that match your tax returns; (2) Current year-to-date financials — P&L and balance sheet within 60–90 days; (3) 12-month projection — monthly revenue, cost of goods sold, gross profit, operating expenses, and net income, showing the loan payment as a line item; (4) DSCR calculation — net operating income divided by annual debt service, showing the result is above your lender's minimum (typically 1.25x). For a startup or new business, the SBA recommends at least 3 years of projected financials with clear assumptions documented. Do not project revenue you haven't contracted yet without labeling it as a projection — lenders underwrite conservatively.

• Executive summary: 1-2 pages — business description, loan purpose, revenue history, management experience, repayment plan
• Use-of-proceeds memo: specific line-item breakdown of how every dollar of the loan will be deployed
• Historical financials: 2 years of income statements and balance sheets matching your tax returns
• Current financials: year-to-date P&L and balance sheet, no older than 90 days
• 12-month projection: monthly P&L showing loan payment as a line item and DSCR calculation

The mechanics above — DSCR, use-of-proceeds, 12-month projections — are the format a lender expects. The financial discipline that makes those numbers credible in the first place (lean overhead, honest owner draws, reinvesting instead of over-drawing) is a separate skill; ClearValue Books' answer on the best book about small business finance covers that operating discipline.

Common Business Plan Mistakes That Kill Loan Applications

The most common business plan mistakes that result in loan denials: (1) Vague use of proceeds — "working capital" without a specific breakdown is a red flag; lenders want to see exactly what the money is for; (2) Projections that assume the loan is already funded — build projections on current revenue, not projected revenue post-funding; (3) No management section — lenders care about who is running the business; include owner bios with relevant industry experience; (4) Financial statements that don't reconcile to tax returns — if your P&L shows $800,000 in revenue but your tax return shows $600,000, the lender will use the tax return; (5) Unsupported market size claims — citing "$10 billion market opportunity" without a source undermines credibility; use census.gov or BLS data for any market-size claims.