Updated October 2026 · 6 minute read
A loan officer reads your projections asking one question: will this business be able to make the payments? This guide covers what banks and SBA lenders expect to see in 2026, the debt service coverage they test, and the mistakes that get projections sent back.
- Period: the SBA guide asks for five years, with year one monthly or quarterly.1
- Statements: projected income statement, balance sheet, cash flow and a capital spending budget.1
- History: existing businesses also show the last 3–5 years of actual results.1
- Coverage: SBA 7(a) Small Loans need DSCR of at least 1.10, historical or projected, from March 1, 2026.23
- Assumptions written down, and numbers that tie back to your tax returns.
What lenders want to see
| Item | What it shows the lender |
|---|---|
| Historical statements, last 3–5 years1 | What the business has actually done; the base the projections grow from |
| Projected income statement1 | Sales, costs and profit by month in year one, then yearly |
| Projected cash flow statement1 | Whether cash covers payroll, inventory and loan payments month to month |
| Projected balance sheet1 | Debt, equity and working capital after the loan |
| Capital expenditure budget1 | Equipment or build-out the loan pays for, and when |
| Funding request and use of funds1 | How much you need, debt or equity, terms, and what each dollar is for |
| Assumptions page | The drivers behind every number: prices, volumes, hires, costs |
| Debt service coverage2 | That cash flow covers all loan payments, including the new one |
Statement list and periods from the SBA’s Write your business plan guide;1 coverage from SBA Procedural Notice 5000-876777 as summarised by NAGGL.2
The repayment test: DSCR
Debt service coverage ratio compares cash flow available to pay debt with the payments due. For SBA 7(a) Small Loans receiving loan numbers on or after March 1, 2026, the applicant must reach at least 1.10 to 1 on a historical or projected basis.23 Banks set their own minimums for conventional loans, so ask yours.
Worked example, using example assumptions:
| Line | Year 1 projection |
|---|---|
| Operating cash flow available for debt | $96,000 |
| Existing loan payments | $18,000 |
| New loan payments | $54,000 |
| Total debt service | $72,000 |
| DSCR = $96,000 ÷ $72,000 | 1.33, above the 1.10 SBA small-loan minimum |
Include the new loan in the payments, and run the same test on your weakest projected year, not just the best one.
Assumptions that hold up
- Grow from history. If sales grew 8% a year for three years, a 40% jump needs a reason the lender can check, such as a signed contract.
- Tie costs to sales. Cost of goods, card fees and commissions should move with revenue, not stay flat.
- Show hiring and wages by month, including payroll taxes.
- Put loan terms in: amount, rate, term and the monthly payment you used.
- Include a downside case, for example sales 15% lower, and show you can still make the payments.
Red flags that get projections sent back
| Red flag | Fix |
|---|---|
| Year-one sales far above any past year | Explain the driver and phase it in by month |
| Profit doesn’t match tax returns | Reconcile and note add-backs such as depreciation |
| No cash flow statement | Add one; profit is not cash |
| New loan payment missing | Add it to debt service and interest expense |
| Owner pay left out | Include a realistic owner salary or draw |
| No assumptions page | List every driver on one tab |
Build lender-ready projections in Excel
- Tab 1, Assumptions: prices, volumes, growth, wages, costs and loan terms.
- Tab 2, History: last three years of income statement and balance sheet from your returns.
- Tab 3, Monthly year one: income and cash flow by month, driven by the assumptions.
- Tab 4, Years two to five: yearly totals.
- Tab 5, Balance sheet that balances every period.
- Tab 6, DSCR: cash flow ÷ debt service for each year, flagged against the lender’s minimum.
Want projections a lender can approve?
Our Loan-Ready Financials service builds your P&L, cash flow, 3-year projections and DSCR from your real records, ready for SBA and bank applications, at a fixed price.
Questions
How many years of financial projections do banks want?
The SBA’s business plan guide asks for a five-year financial outlook, with the first year broken down quarterly or even monthly. Ask your lender what period it wants, and build at least the first year month by month.
What DSCR do I need for an SBA loan in 2026?
For SBA 7(a) Small Loans with loan numbers issued on or after March 1, 2026, the applicant’s debt service coverage must be at least 1.10 to 1, on either a historical or projected basis. Other loan types and banks set their own minimums.
What financial statements should projections include?
Projected income statements, balance sheets and cash flow statements, plus a capital expenditure budget, according to the SBA. Lenders also want the assumptions behind the numbers and, for an existing business, the last three to five years of historical statements.
Why do banks reject financial projections?
Typical problems are growth that the history doesn’t support, numbers that don’t match tax returns, missing assumptions, no cash flow statement, and debt service that ignores the new loan. A projection a lender can trace back to real records is far easier to approve.
Can I make my own projections in Excel?
Yes. Lenders care that the figures are realistic, consistent with your records and clearly explained, not which software made them. Keep assumptions on their own tab so the lender can see what drives every number.
Related guides
Sources
- U.S. Small Business Administration: Write your business plan
- NAGGL: SBA notice revising underwriting requirements for 7(a) Small Loans (Procedural Notice 5000-876777, February 2026)
- Starfield & Smith: SOP 50 10 8 update, new 7(a) small loan underwriting requirements, January 2026
Tahir Abbas
Founder of Softotech Solutions. Tahir builds loan-ready financial statements, projections and DSCR models in Excel for small businesses. SBA rules change; confirm current requirements with your lender. This is general information, not lending or tax advice.