When applying for an SBA loan, financial projections and a business plan often play a crucial role in the evaluation process. While not all SBA loans require these projections, and not all lenders will request them, understanding when and why they are needed can significantly enhance your loan application.
Since the requirement is to provide projections in the absence of historical performance to support the loan, here are some examples of when projections are required:
Note, lenders do have the authority to request projections on any SBA request to support their decision.
Because business models may be different depending on the industry, projections can come in all shapes and sizes. They must also include relevant assumptions to understand how the numbers were derived.
In step with building your assumptions is something known as key performance indicators (KPIs). These are metrics that measure a company’s success. An example might be a chart looking out 30 days on car rentals to determine what percentage of the fleet is rented. This helps manage the size of the fleet to maximize revenue and profitability. Each industry will have its own unique KPIs. It’s good for a business to understand what underlying information leads to success.
Projections should include:
These are just a sample of major categories included in the projections; most will be more detailed to provide the most accurate picture of business expectations.
There are resources available to assist a business owner with projections (some are free). Be sure to ask about the options available for assistance. While projections are a guess at what will happen in the future, well-thought-out ones with supporting data can be very effective.
At Community First Bank of Indiana, we’ve been a Preferred Lender with the SBA since our founding in 2003. You can feel confident working with our team as we share our 30+ years of industry experience with a specialty in delivering the U.S. Small Business Administration (SBA) programs to small businesses.
