Financial Projections Made Easy

Why “Common Sense” SBA Loans Still Fail

Dr. Paul Borosky, DBA, MBA.

Many SBA loan denials surprise business owners because, on the surface, the deal looks solid. The owner has industry experience, strong credit, and a business that appears profitable. Yet the loan still gets declined.

Example:
A service business applying for a $300,000 SBA loan shows projected first-year revenue of $900,000. On paper, that sounds reasonable. But the projections don’t explain how that revenue is generated—no customer volume assumptions, no pricing logic, and no ramp-up period. Expenses are understated, owner compensation is missing, and loan payments aren’t properly reflected in cash flow. The lender recalculates the numbers, DSCR falls below minimum standards, and the loan is denied.

The core issue is not the business—it’s the projections. SBA lenders are trained to stress-test assumptions. When revenues aren’t clearly explained or costs don’t align with operational reality, projections lose credibility immediately. If the math doesn’t reconcile cleanly or assumptions feel optimistic instead of conservative, lenders assume risk—even if the business itself is viable.

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SBA Loan Approval vs. Projection Quality — Decision Table

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Key Takeaways

• SBA loans aren’t denied because of bad businesses—they’re denied because projections don’t survive lender scrutiny.
• DSCR, cash flow timing, and expense realism matter more than revenue growth or passion.
• Lenders assume projections are wrong; approval depends on how much margin exists when they are.
• Lender-ready financial projections are built for repayment clarity—not optimism—and that’s what gets loans approved.

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How SBA Lenders Actually Read Financial Projections

SBA lenders approach financial projections very differently than business owners. Most owners fall into one of two traps: they are either too conservative, understating revenue out of fear of being unrealistic, or too ambitious, projecting aggressive growth without operational proof. Neither approach helps approval. Lenders are not looking for optimism or modesty—they are looking for defensible assumptions.

From a lender’s perspective, projections are not aspirational. They are a stress test. The question isn’t whether the business can succeed, but whether it can service debt under pressure. Every number is viewed through a risk filter.

Before reading the full business plan, lenders scan projections for a few critical items:

• Revenue assumptions and how they are calculated
• Expense completeness and realism
• Cash flow timing
• Owner compensation
• Debt service coverage margin

Assumptions matter more than totals. A clean-looking revenue number means nothing if the logic behind it isn’t explained. Lenders want to see how pricing, customer volume, capacity, and ramp-up periods connect logically. When assumptions are vague or missing, underwriters assume the risk is understated.

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Cash Flow Timing (Monthly Reality)

Why annual profit means nothing
Annual profit can hide serious cash problems. SBA lenders review monthly cash flow because loan payments occur monthly, not annually. A business can be profitable on paper and still miss payments due to timing gaps.

Seasonal dips and early-month shortages
Monthly P&L projections reveal:

• Slow seasons
• Ramp-up periods
• Early-month payroll and rent pressure
• Revenue delays versus expense timing

If projections don’t reflect seasonality or show identical monthly performance, lenders assume the model is unrealistic.

Owner draws and hidden drains
Many projections ignore or minimize owner compensation. Lenders do not. They assume the owner must be paid and will adjust cash flow accordingly. Other hidden drains include:

• Personal expenses run through the business
• Tax obligations
• Irregular but recurring costs

When these are missing, lenders treat projections as incomplete.

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3.3 Expense Realism

Commonly missing or understated costs
The fastest way to lose credibility is understating expenses. Lenders frequently see projections missing:

• Insurance increases
• Maintenance and repairs
• Professional fees
• Marketing ramp-up costs
• Technology and software creep

Payroll, insurance, maintenance, inflation
Expenses should grow logically over time. Flat payroll, static insurance, and unchanged variable costs signal poor modeling. Inflation and growth pressures are expected—even in conservative projections.

Why “clean” spreadsheets raise red flags
Perfectly flat expense lines are immediate warning signs. Real businesses experience change. When office expenses, supplies, or variable costs never increase, lenders assume:

• Costs were intentionally suppressed
• Risk was understated
• DSCR is artificially inflated

Clean spreadsheets look good to borrowers—but they look suspicious to lenders.

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A Simple SBA Projection Example (Lender View)

To understand how SBA lenders evaluate projections, consider a breakfast-focused restaurant—XYZ-ABC Restaurant—located in Orlando. This example reflects the type of modeling lenders prefer: conservative, explainable, and cash-flow driven.

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Revenue Assumptions

XYZ-ABC Restaurant operates six days per week, serving breakfast and early lunch. Revenue is built from capacity and pricing, not wishful growth.

• Average tickets per day: 180
• Average ticket size: $14
• Weekly operating days: 6

Weekly Revenue:
180 × $14 × 6 = $15,120

Annualized Revenue:
$15,120 × 52 = $786,240

From a lender’s perspective, this works because:

• Volume aligns with seating capacity and hours
• Pricing reflects local breakfast restaurants
• No immediate full-capacity assumption on day one
• No unexplained spikes or hockey-stick growth

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Expense Structure

Expenses are fully loaded and intentionally conservative.

• Cost of goods sold (food & beverage): 30%
• Payroll (kitchen, front-of-house, payroll taxes): 28%
• Rent (Orlando market): $6,500/month
• Utilities, insurance, supplies, POS, maintenance: Fully itemized
• Marketing: modest but consistent
• Owner compensation: included and realistic

Total operating expenses scale with revenue and increase modestly over time, reflecting inflation and operational growth. No flat lines. No suppressed costs.

This immediately signals credibility.

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Loan Payment Integration

XYZ-ABC Restaurant is requesting a $350,000 SBA 7(a) loan for build-out, equipment, and working capital.

• Estimated annual loan payment: $52,000
• Loan payments are embedded directly into monthly cash flow
• No deferrals or unrealistic grace assumptions

Lenders care less about the loan amount than whether payments fit comfortably into operating cash flow.

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Why This Example Works from an Underwriting Lens

From an underwriting perspective, this projection works because it is built on realism rather than optimism. Revenue assumptions are grounded in seating capacity, operating hours, and local market pricing, not unsupported growth targets. Expenses reflect the true cost of running a restaurant, including payroll, insurance, maintenance, and ongoing operational pressures. Owner compensation is clearly included, ensuring cash flow is not overstated, and loan payments are modeled conservatively within monthly cash flow. The result is a defensible projection that demonstrates consistent debt service ability under normal operating conditions—exactly what SBA lenders look for when approving loans.

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Common Projection Mistakes That Kill SBA Loans

Most SBA loan denials are not caused by bad businesses—they’re caused by avoidable projection mistakes. These errors immediately reduce lender confidence and trigger deeper scrutiny, recalculations, or outright declines.

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Overestimating or Understating Revenue

Revenue errors cut both ways. Aggressive projections without clear logic signal optimism bias, while overly conservative numbers raise questions about viability. Lenders want defensible revenue, not extremes.

Red flags include:

• No explanation for customer volume or pricing
• Immediate full utilization
• Flat or stagnant revenue in a growth scenario

If revenue assumptions can’t be explained in one sentence, lenders assume they won’t hold up.

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Ignoring Owner Compensation (This Is Non-Negotiable)

Owner compensation is mandatory in SBA underwriting. If it’s missing or minimized, lenders will add it back themselves.

Whether the owner acts as a manager, executive, or operator, lenders assume:

• The business must support a market-reasonable salary
• Cash flow must cover both the owner and the debt

When owner pay is ignored, profits are artificially inflated—and lenders know it.

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No Working Capital Buffer (Minimum 3–6 Months)

SBA lenders expect post-funding liquidity, typically three to six months of operating expenses, to protect against slow periods and unexpected costs. Projections that leave a business cash-thin signal higher default risk and immediate financial stress. Working capital buffers are not optional—they function as risk insurance and materially improve approval confidence.

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Projections That Contradict the Business Plan

Nothing damages credibility faster than numbers that don’t match the narrative.

Common contradictions:

• “Lean startup” language with heavy fixed costs
• “Owner-operated” businesses without owner wages
• “Seasonal business” descriptions with flat monthly revenue

Lenders read projections and narratives together. If they don’t align, the numbers lose trust.

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No Downside or Stress Testing

Lenders assume projections will be wrong; what matters is how wrong they can be before repayment fails. Strong SBA files show stress testing, such as revenue running 10–15% lower, modest expense increases, or slower ramp-up periods. Projections that only work under perfect conditions signal elevated risk and are not lender-ready.

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What SBA Lenders Expect (But Rarely Receive)

SBA lenders see thousands of financial projections every year. Most look polished. Very few are actually underwriting-ready. The difference isn’t sophistication—it’s clarity, structure, and logic.

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Monthly Cash Flow Projections

Lenders expect month-by-month cash flow, not just annual summaries. Loan payments are monthly, payroll is frequent, and rent doesn’t wait for year-end profits.

Monthly projections allow lenders to:

• Identify early cash shortfalls
• Evaluate ramp-up periods
• Spot seasonal pressure points
• Confirm the business can survive slow months

Annual-only projections hide risk and invite skepticism.

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Conservative, Explainable Revenue and Cost Assumptions

SBA lenders want revenue and cost assumptions that are easy to explain and logically defensible. Strong projections clearly show how revenue is calculated, why pricing fits the market, how volume ramps over time, and how costs scale with growth. When assumptions are transparent, lenders trust the numbers. When they aren’t, lenders assume optimism and increase scrutiny.

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Clear Repayment Margin

Passing DSCR is not enough. Lenders look for repayment cushion—extra cash flow that protects against disruptions.

Strong files show:

• Debt service embedded into cash flow
• Comfortable coverage above minimum thresholds
• Margin remaining after owner compensation

Thin margins stall approvals. Cushion moves deals forward.

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Projections Aligned with the Loan Request

Projections must justify why the loan amount is needed and how it will be repaid.

Lenders expect:

• Loan proceeds tied directly to operational growth
• Expense increases that match the use of funds
• Revenue growth that follows capacity expansion

When the loan request and projections don’t align, lenders question the entire deal.

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Easy-to-Review, Lender-Friendly Formatting

SBA lenders don’t want a single income statement dropped into a file—they want transparent logic. Strong projections clearly show revenue calculations, employee counts and pay rates, growth assumptions for fixed and variable costs, and a clear separation between operating cash flow and debt service. When projections are easy to follow, lenders spend less time questioning and more time approving.

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Why Generic Templates and Software Fall Short

Most SBA borrowers rely on QuickBooks, Excel templates, or off-the-shelf projection tools to prepare financials. While these tools are useful for bookkeeping and internal tracking, they fall short when it comes to SBA loan underwriting.

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Why QuickBooks and Excel Outputs Aren’t Lender-Ready

QuickBooks and most Excel templates are designed to record or summarize data—not explain it. They generate clean-looking income statements, but they don’t show how the numbers were built.

From a lender’s perspective, these tools typically:

• Present totals without assumptions
• Hide revenue logic behind formulas
• Omit cash flow timing detail
• Ignore debt service integration

A neat P&L is not the same as an approvable projection.

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Missing Underwriting Logic

SBA lenders underwrite risk, not spreadsheets. Generic tools don’t apply underwriting logic such as:

• Conservative ramp-up periods
• Owner compensation normalization
• Expense inflation and growth modeling

When projections lack this logic, lenders must rebuild the model themselves. That slows approvals and increases the chance of rejection.

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Lack of SBA-Specific Modeling

Generic templates are not built for startups or SBA scenarios. They rarely account for:

• Startup revenue ramp timing
• Gradual staffing increases
• Working capital burn during early months
• Loan payment start dates and cash flow impact
• Conservative assumptions required by SBA guidelines

Without SBA-specific structure, projections often look optimistic—even when the numbers are modest.

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How Dr. Paul Borosky Builds SBA-Ready Financial Projections

I build financial projections the same way SBA lenders read them—from the risk side forward, not from the revenue side backward.

Lender-First Modeling Approach

Every model starts with repayment reality, not sales ambition. Debt service, owner compensation, and operating pressure are built in from the beginning so DSCR is real, not engineered.

Risk-Aware and Startup-Appropriate Assumptions

Projections include:

• Conservative startup ramp-up timelines
• Realistic staffing and payroll growth
• Expense inflation and cost creep
• Working capital burn during early months

The goal is not to impress—it’s to hold up when recalculated by underwriting.

Integration with SBA Business Plans

Financial projections are aligned line-by-line with the business plan narrative:

• Use of funds matches expense growth
• Capacity expansion explains revenue increases
• Operational strategy supports cash flow

When numbers and narrative reinforce each other, lender confidence rises.

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9. Who This Is For

These projections are built for business owners who need real answers, not generic spreadsheets:

• SBA loan applicants preparing for approval

• Startups seeking first-time funding

• Existing businesses refinancing or expanding

• Owners frustrated by vague lender feedback and stalled files

If a lender has ever said “the numbers don’t quite work,” this is for you.

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10. Get Projections Built for Approval

SBA loans are approved—or denied—on financial projections. Not on passion. Not on effort. On repayment clarity.

If you want projections that:

• Survive lender recalculation
• Clearly support DSCR requirements
• Align with SBA underwriting expectations
• Reduce delays and rework

then they must be built for approval, not optimism.

Call or text Dr. Paul Borosky at (321) 948-9588
SBA-ready financial projections.
Built to move lenders forward.