What Lenders Look for in Your Business Plan
Many business plans get rejected not because the business idea is bad, but because the plan itself does not address what lenders need to see. SBA lenders review hundreds of applications each month. They know exactly what separates fundable businesses from risky ones.
Here are the 7 critical elements every SBA lender evaluates when reviewing your business plan.
1. Executive Summary That Sells
Your executive summary is the first thing lenders read, and often the last if it does not grab their attention. In 1-2 pages, you need to clearly communicate what your business does, how much funding you need, and how you will use it.
Strong executive summaries include specific numbers: "Seeking $150,000 SBA 7(a) loan to open a 2,500 sq ft fitness studio in downtown Phoenix, projected to generate $380,000 in Year 1 revenue."
2. Clear Market Opportunity With Data
Lenders want proof that customers exist and will pay for your product or service. This means including market research with actual numbers: market size, growth rate, target customer demographics, and competitive analysis.
Cite reputable sources like IBISWorld, Census data, or industry associations. Avoid vague statements like "the market is growing." Instead, write "The U.S. fitness industry generated $35 billion in 2025 revenue and is projected to grow 3.5% annually through 2030."
3. Realistic Financial Projections
Nothing kills a loan application faster than fantasy numbers. Lenders have seen thousands of business plans and can spot inflated projections instantly.
Your projections should include monthly cash flow for Year 1 and annual projections for Years 2-3. Every number should be defensible. If you project $500,000 in revenue, show the math: 500 customers x $1,000 average ticket = $500,000.
4. Debt Service Coverage Ratio (DSCR)
This is the number lenders care about most. DSCR measures whether your business generates enough cash to repay the loan. The formula is simple: Net Operating Income divided by Total Debt Service.
Most SBA lenders require a DSCR of 1.25 or higher. This means for every $1 in loan payments, your business generates $1.25 in operating income. Calculate your DSCR and include it prominently in your financial projections.
5. Management Team Credentials
Lenders bet on people as much as ideas. Your management section should highlight relevant experience, industry expertise, and track record of success.
Include brief bios for key team members. If you have gaps in experience, address them directly. You might note that you have hired a CFO with 15 years of restaurant finance experience to complement your operations background.
6. Use of Funds Breakdown
Lenders need to know exactly where their money goes. Provide a detailed breakdown: equipment ($45,000), leasehold improvements ($30,000), initial inventory ($25,000), working capital ($50,000).
Vague requests like "general business purposes" raise red flags. The more specific your use of funds, the more confident lenders feel about your planning ability.
7. Repayment Strategy
How will you pay the loan back? This section demonstrates that you have thought through the entire business lifecycle, not just the launch.
Include your projected break-even timeline, cash reserves policy, and contingency plans. Strong repayment strategies address multiple scenarios: "At projected revenue, we achieve break-even in Month 8. Even at 80% of projections, we maintain positive cash flow by Month 14."
Get Your Plan Approved
Creating an SBA-ready business plan takes expertise. Every section must work together to tell a compelling, data-backed story that gives lenders confidence in your ability to succeed and repay.
BizPlanStudio specializes in creating lender-ready business plans that address all 7 of these critical elements. Our SBA-format plans include 24-month financial projections, DSCR calculations, and the exact documentation lenders require.
Ready to get funded? Start your business plan today.