Business Plans for SBA Loans

Getting an SBA loan is a little like playing Monopoly. You need a solid plan, the right pieces in the right places, and — yes — a little bit of luck in terms of timing and fit. But unlike Monopoly, the plan itself matters enormously. A neatly prepared, content-rich business plan can make the difference between a lender who's enthusiastic about your deal and one who's looking for a reason to decline.

SBA underwriters aren't just reading your business plan for information. They're assessing your judgment, your industry knowledge, and your understanding of what it takes to succeed. A vague plan reads as a vague borrower.

What a Business Plan Needs to Cover

Start with a clear executive summary: who you are, what the business does, what you're asking for, and why you'll be successful. Keep it to one page. The underwriter will read it first and use it to frame everything else in the package.

Business details should include the legal structure, ownership breakdown, location, hours of operation, and a description of what the business actually does and who it serves. Be specific. 'Full-service HVAC contractor serving residential and light commercial customers in the Dallas metro area' is better than 'HVAC company.'

A market and competitive analysis demonstrates that you understand your industry. Who are your competitors? What's their pricing? What's your differentiation? For acquisitions, this is also where you explain why the existing customer base will stay with you as the new owner.

Financial Projections

For acquisitions, your projections should start with the seller's historical financials and build from there. What stays the same under new ownership? What changes? If the seller has been taking a $200,000 salary and you plan to pay yourself $80,000, that $120,000 difference improves your debt service coverage — document it.

Three years of monthly projections is standard. Year one should be conservative, based on the target business's actual performance rather than optimistic assumptions. Lenders run sensitivity analyses — they want to know the deal still works if revenue drops 15%.

The Use of Proceeds Statement

This is often underestimated. The lender wants to know exactly where every dollar of the loan is going: purchase price, working capital, inventory, equipment, renovation, transaction costs. Line-item clarity signals that you've thought the deal through. Round numbers with vague categories signal that you haven't.

The use of proceeds also helps the lender structure the loan correctly — different uses have different eligible terms and collateral treatments under SBA program rules.