Writing a business plan a lender will actually read
- Business Funding, Starting a Business
By
John Shim, founder and editor
Table of Contents
You know the business. You’ve probably been running some version of it already, cutting hair in your kitchen, fixing cars at weekends, cleaning houses for cash. Now you need money to do it properly, and the bank, the credit union or the microlender has asked for a business plan. The temptation is to search for a template, fill in one page in an evening and send it off. Here’s the thing most people get wrong: the one-page plan you found is almost certainly the wrong document for a lender, and SBA itself says so.
Two kinds of plan, and only one is for the bank
SBA’s business plan guidance describes two formats. There’s no rule forcing you into either, SBA says there’s no right or wrong way to write a plan, and you should use the sections that make sense for your business. But the two formats exist for different readers, and mixing them up is the single most common mistake.
| Traditional plan | Lean startup plan | |
|---|---|---|
| Who it’s for | Lenders and investors, who SBA says “commonly request this plan” | You, while you work out whether the idea holds together |
| Length | Detailed; can run to dozens of pages | Typically one page |
| Time to write | Days or weeks | SBA says it can take as little as one hour |
| The catch | Takes real work up front | SBA’s own caveat: “Some lenders and investors may ask for more information” |
The lean plan is genuinely useful, it forces you to name your customers, your costs and your revenue streams on one sheet of paper. Write one first. Just don’t hand it to a loan officer and expect it to carry a funding request. The mechanism here is simple: a lender is being asked to put money at risk, and a one-page sketch gives them nothing to assess that risk against. The traditional plan exists to answer, in writing, every question an underwriter would otherwise have to ask you.
The nine sections lenders expect
SBA’s traditional format has nine parts. You don’t need to treat them as a legal form, SBA explicitly says to use the sections that fit, but each one answers a question a lender will ask anyway, so skipping one usually just moves the question to a phone call.
The executive summary states what the company is, why it will succeed, your mission, your product or service, and who runs it. SBA says that if you plan to ask for financing, this section should also include financial information and high-level growth plans, which tells you something about how it gets read: the money question belongs on page one, not page twelve.
The company description covers the problems you solve, who you serve and your competitive advantages. The market analysis covers the industry outlook, your target market and what your competitors do. Organisation and management sets out your legal structure, sole proprietor, LLC, partnership, corporation, and who the key people are, with résumés. If you haven’t sorted the legal structure yet, do that first; our guide to registering a business walks through it.
The service or product line section explains what you sell, its lifecycle, and any intellectual property plans. Marketing and sales explains how you’ll attract and keep customers and how a sale actually happens, SBA notes you’ll refer back to this section when you build your financial projections, because a revenue forecast with no sales process behind it is just a wish.
Then come the two sections that decide whether the plan works as a loan document: the funding request and the financial projections. The appendix holds the supporting evidence, credit histories, résumés, licences, permits, contracts, letters of reference.
The numbers are the plan
A loan officer can forgive clumsy prose. What they can’t work around is a funding request and a set of projections that don’t agree with each other. SBA’s guidance is unusually specific here, and it’s worth taking literally.
| What SBA asks for | The detail |
|---|---|
| Funding request | How much you need over the next five years and exactly what it’s for, equipment, materials, salaries, bills until revenue rises. Specify whether you want debt or equity, the terms you’d like, and your future financial plans, such as paying off the debt |
| Forward projections | Five years of forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets |
| First-year detail | Year one broken out quarterly or, better, monthly |
| Explanations | Every projection needs a written explanation of the assumptions behind it |
| The matching rule | Your projections must match your funding request |
| Historical financials | If the business already exists: income statements, balance sheets and cash flow statements for the last three to five years, plus any collateral you could put against the loan |
That matching rule is the heart of it. If you ask for $30,000 but your cash flow forecast shows you running out of money unless you get $45,000, the plan has just argued against itself. SBA’s stated goal for the projections section is to convince the reader the business is stable and will be a financial success, which means the numbers have to hold together as a story, not just fill in a spreadsheet.
Two smaller pieces of SBA guidance are easy to miss. On startup costs, count at least one year of monthly expenses; SBA says counting five years is ideal. And include a break-even analysis, fixed costs divided by the difference between your price per unit and your variable cost per unit. SBA is refreshingly honest that this is “an estimate for lender viability,” not accounting, and suggests padding your figures by around 10% to cover unpredictable costs.
What the lender looks at before anything else
SBA doesn’t publish a reading order for loan officers, but its Lender Match preparation list is the closest thing to one, because it’s what SBA tells borrowers to have ready before any of its 800-plus participating lenders will look at them seriously: a business plan (“Most lenders expect a business plan when you apply for startup funding”), the amount you want and what you’ll use it for, your credit history, financial projections that show you understand your finances and how you’ll repay, collateral, and industry experience, the last one helpful but not required.
Notice what that list is really describing: the executive summary, the funding request and the projections. Those are the load-bearing sections. For a brand-new business there’s one more uncomfortable mechanism to understand: SBA’s guidance states that loan eligibility for a new business is typically based on the owner’s personal credit score, because there’s no business track record to judge instead. The plan can’t fix a credit file, but a credible repayment story in the projections is the part of the application you actually control.
What goes in the envelope with it
If you’re heading for an SBA-guaranteed 7(a) loan, remember you apply through a lender, never directly with SBA, and SBA says application contents vary with the loan size and the lender’s processing method. SBA’s published 7(a) application checklist gives a sense of the supporting paperwork: a profit-and-loss statement current within 180 days of applying, supplementary schedules from the last three fiscal years, a one-year detailed projection of income and finances with a written explanation of how you’ll achieve it, signed personal and business federal tax returns for the previous three years for all principals, résumés for each principal, and a business history explaining why the loan is needed and how it will help. The lender-side rulebook was refreshed too, SOP 50 10 is the standard your lender underwrites against, so expect your lender to drive exactly what’s required.
For context, 7(a) loans run up to $5 million, while microloans top out at $50,000, and for most readers of this site, the microloan route is the realistic one. See who actually gets a 7(a) and our guide to SBA microloans before deciding which door to knock on.
Don’t start from a blank page
SBA publishes filled-in sample plans, a traditional plan for a fictional consulting firm and both traditional and lean versions for a toy company, with Spanish versions too. Reading a finished example teaches you more about tone and depth than any outline. And you don’t have to do this alone: free, in-person help exists specifically for people writing their first plan. If you’re on benefits while starting out, get advice before the projections change your reported income.
Frequently asked questions
Do I have to use SBA’s exact nine-section outline? No. SBA says there’s no right or wrong way to write a business plan and that you should use the sections that make the most sense for your business. The nine sections are a map of the questions lenders ask, not a legal form.
Can I just send the one-page lean plan? You can, but SBA’s own guidance warns that some lenders and investors may ask for more information, and it identifies the traditional plan as the format lenders commonly request. Use the lean plan to think; use the traditional plan to borrow.
How many years of projections do lenders want? SBA’s guidance asks for five years of forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets, with the first year broken out quarterly or monthly, plus written explanations, and the projections must match your funding request.
Is a business plan only for brand-new businesses? No, SBA’s own blog calls that a myth, and SBA describes a plan as a living document. Established businesses use the same structure but add three to five years of historical financial statements and a list of possible collateral.
Will a good plan get me a loan if my credit is poor? Not by itself. SBA notes that loan eligibility for a new business is typically based on the owner’s personal credit score, and 7(a) eligibility requires being creditworthy with a reasonable ability to repay. A strong plan helps most where the decision is close, and a mismatched funding request can sink an otherwise decent application.