# Cash Flow Forecast for an SBA Loan Application

Source: https://www.cashflowforecasttemplates.co.uk/guides/cash-flow-forecast-for-an-sba-loan-application
Updated: September 25, 2026

> For an SBA loan application, most lenders ask for a monthly cash flow projection for at least the first year and annual projections for two to three years, with the loan proceeds, how they’re used and every repayment included. Show clear assumptions, a downside case, and that trading cash flow comfortably covers loan payments.

Loans guaranteed by the US Small Business Administration are a common route to funding for small businesses that don’t qualify for conventional bank loans. The lender, usually a bank or credit union, makes the loan and the SBA guarantees part of it, but the lender still needs to be confident the business can repay. For many applications, especially startups and acquisitions, a cash flow projection is at the heart of that decision.

Requirements differ between lenders and loan programs and can change. Use this guide to prepare, and confirm the exact format your lender wants.

## What lenders typically ask for

- **Monthly cash flow projection for the first 12 months**, often starting from when the loan funds.
- **Annual projections for years two and three**, sometimes more for larger loans.
- **Assumptions** behind sales, costs and growth.
- **Use of proceeds**: what the loan will pay for, and when.
- **Personal and business financial statements and tax returns**, which the projection should be consistent with.
- **A business plan**, particularly for startups and changes of ownership.

## Building the projection

### 1. Start with the loan

Show the loan proceeds as cash in when you expect them, and the uses as cash out: equipment, working capital, real estate, inventory or buying a business. Then show every monthly loan payment for the whole projection period.

### 2. Build sales from evidence

Base sales on your history, signed contracts, capacity and industry data. For a startup, build from the bottom up: customers, prices and a ramp-up period. Explain every major assumption. See [forecasting for a new business](/guides/how-to-forecast-cash-flow-for-a-new-business-with-no-history).

### 3. Include every cost

Payroll and payroll taxes, rent, utilities, insurance, inventory, marketing, professional fees, taxes, and **owner compensation**. Lenders often adjust projections that leave out the owner’s salary.

### 4. Show the timing

Receipts in the month customers pay, not the month you invoice. Large annual and quarterly payments in the months they fall.

## Debt service coverage

Lenders want to see that the business generates enough cash to cover loan payments with room to spare. A common measure is the **debt service coverage ratio (DSCR)**:

**DSCR = cash available for debt service ÷ total annual debt payments**

| | Annual |
|---|---|
| Cash available for debt service | 125,000 |
| Loan payments (principal and interest) | 84,000 |
| **DSCR** | **1.49** |

Many lenders look for a ratio of at least about 1.25, meaning cash flow is 25 percent higher than loan payments, though requirements vary by lender and loan type. Show the ratio for each year of your projection, and in your downside case.

## Show a downside case

Build a version with sales 15 to 25 percent lower, or a slower ramp-up, and show that loan payments are still covered, or explain what you would do: reduce owner draws, delay hires, cut discretionary spending. A projection that only works in the best case is a red flag.

## Worked example: equipment and working capital

A manufacturer applies for $300,000: $220,000 for a new machine and $80,000 of working capital.

| | Month 1 | Month 3 | Month 6 | Month 12 |
|---|---|---|---|---|
| Loan proceeds | 300,000 | 0 | 0 | 0 |
| Machine purchase | −220,000 | 0 | 0 | 0 |
| Extra sales from new capacity | 0 | 18,000 | 40,000 | 45,000 |
| Extra materials and labour | 0 | −14,000 | −28,000 | −31,000 |
| Loan payment | −3,600 | −3,600 | −3,600 | −3,600 |

Extra capacity takes a few months to fill, so the working capital portion of the loan carries the business through the ramp-up. By month 6, the extra cash from the machine covers the loan payment several times over. The projection tells the lender a clear story: what the money buys, how long it takes to pay off, and what covers the repayments meanwhile.

## Acquisitions and startups

Two situations get extra scrutiny.

**Buying a business.** The lender will compare your projection with the seller’s historical financials. Start from the business’s actual track record, then show clearly what changes under your ownership: your salary instead of the seller’s, any new debt payments, and any changes you plan to make. Improvements should be modest and explained; lenders are wary of projections that assume a new owner will transform results immediately.

**Startups.** With no history, the assumptions page carries more weight. Build sales from capacity and local evidence, show a slow ramp-up, include your own living costs, and make sure the working capital part of the loan covers the months before the business breaks even. A realistic ramp-up with a comfortable cash cushion is more persuasive than an optimistic one.

## Presenting it

- A one-page summary: amount, use of proceeds, lowest cash balance, DSCR by year.
- The full monthly projection for year one, and annual totals for years two and three.
- An assumptions page.
- The downside case.
- Consistency with your business plan, tax returns and historical financials.

## After the loan funds

Most lenders ask for regular financial updates during the life of the loan. Keep the projection you submitted and roll it forward monthly with actual figures. If results fall behind, you’ll see it early and can talk to your lender before a payment is at risk, which is always a better conversation than one after a missed payment. A record of forecasts that track closely to actual results also makes your next application easier.

## Free help

SBA resource partners, including SCORE mentors and Small Business Development Centers, offer free help with business plans and projections. Your lender can also tell you exactly what format they want. It’s worth asking before you start.

## Common mistakes

- **Leaving out loan payments or interest.**
- **No owner salary.**
- **Sales growth with no evidence.**
- **Projections inconsistent with tax returns** or historical statements.
- **Ignoring working capital**, such as inventory and customer credit.
- **No downside case.**
- **Use of proceeds that doesn’t match the forecast**, such as equipment listed in the application but missing from the projection.
- **Projections that start before the loan funds**, so the timing of proceeds and first payments is wrong.

## Templates

The free 12-month template gives you the year-one monthly layout. Premium templates add a 3-year outlook with separate growth rates for income and costs, scenarios that flow through all three years, and a dashboard. See also [what lenders look for](/guides/what-lenders-look-for-in-a-cash-flow-forecast) and the [3-year projection guide](/guides/3-year-cash-flow-projection-template-for-business-plans).

### Does an SBA loan require a cash flow projection?
Lenders making SBA-guaranteed loans typically ask for projections, especially for startups, acquisitions and businesses without a long track record. Requirements vary by lender and loan type.

### How many years of projections do SBA lenders want?
Commonly the first 12 months month by month and two to three years annually. Ask your lender for their preferred format.

### What is debt service coverage ratio?
Cash available to pay debt divided by total debt payments. Many lenders look for at least about 1.25, meaning cash flow is 25 percent more than loan payments, but thresholds vary.

### Can I get free help preparing SBA projections?
Yes. SBA resource partners such as SCORE mentors and Small Business Development Centers offer free help with business plans and financial projections.

### Should the projection include my own salary?
Yes. Lenders want to see that the business can pay the owner a reasonable amount and still cover loan payments.