StartupModel

Financial projections for a bank loan: what lenders check

Financial projections for a bank loan show the lender how your business will earn enough cash to repay them. In practice that means three linked statements (income statement, balance sheet and cash flow), usually for three to five years, with the first year in monthly or quarterly detail, plus the assumptions behind every line. This guide covers what to include, how lenders read it, and the mistakes that most often send an application back.

If you'd rather start from a model built on your numbers, the Full model ($349) produces all three statements with a scenario switch and a Checks sheet.

1. Which statements to include

Income statement (P&L). Revenue, cost of sales, gross profit, operating costs, EBITDA, depreciation, interest, tax and net income. This is what most owners build first, and on its own it isn't enough.

Cash flow statement. Profit is not cash. Customers may pay late, stock ties up cash, equipment is paid for up front and depreciated slowly, and loan principal is repaid out of cash, not out of profit. The cash flow statement shows whether the bank account stays positive.

Balance sheet. Assets, liabilities and equity at each period end. It proves the other two statements are consistent: if the balance sheet doesn't balance, something in the P&L or cash flow is wrong.

Capital spending and uses of funds. What the loan pays for and when. The SBA's business-plan guide explicitly lists capital expenditure budgets alongside the three statements.

The SBA guide puts it in one line: "Provide a prospective financial outlook for the next five years. Include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets." (SBA — Write your business plan)

2. How many years, and how much detail

The same SBA page asks for five years and adds: "For the first year, be even more specific and use quarterly — or even monthly — projections."

A practical approach that satisfies most lenders:

  • Year 1 monthly. This is where the ramp-up, seasonality and the cash low point live.
  • Years 2–5 annual, built from the same drivers.
  • Ask your lender first. Some want three years, some want monthly detail for two. It costs one email and saves a rebuild.

Monthly detail also matters because annual figures hide the cash low point. A business can be profitable over the year and still run out of cash in month four.

3. The assumptions page matters more than the statements

Lenders don't argue with your arithmetic; they argue with your assumptions. Put every assumption in one place, label it, and note the source next to it:

  • Revenue drivers, in the units your business actually sells in: customers per day and average ticket, subscribers and price, billable hours and rate.
  • Ramp-up. Starting level and how long it takes to reach normal trading.
  • Cost of sales as a share of revenue, from supplier quotes or recipe costing.
  • Fixed costs: rent from the lease, utilities, insurance.
  • People: roles, start dates, salaries, plus payroll taxes and benefits as a separate line.
  • Working capital: how many days customers take to pay, how much stock you hold, how long you take to pay suppliers.
  • Financing: your equity, the loan amount, rate and term.

A good test: could someone who has never met you change one assumption and understand what happened to cash? If not, the model needs restructuring before it goes to the bank.

4. What the lender actually checks

Every lender has its own credit process, but the questions are consistent:

  1. Repayment capacity. Is cash from operations comfortably larger than interest plus principal due in each year? Lenders often express this as a coverage ratio. Ask yours which measure and threshold they use, and show it.
  2. Downside resilience. If revenue comes in lower than planned, are repayments still covered? A low case built into the model answers this before it's asked.
  3. Owner commitment. How much of your own money goes in, and what it pays for.
  4. Consistency. Does the balance sheet balance? Does closing cash on the balance sheet equal the cash flow statement? Do annual totals equal the sum of the months? An inconsistency here makes every other number suspect.
  5. Plausibility. Are margins and growth in line with the business type and the market you describe in the plan?

5. Mistakes that send applications back

  • P&L only. No cash flow, no balance sheet. Usually the first thing the loan officer asks for.
  • Hard-coded numbers. Typed values where formulas should be. The lender changes an assumption and nothing moves.
  • No ramp-up. Day-one revenue equal to a mature competitor's.
  • Loan repayments missing from cash flow. Interest is in the P&L, principal is not, and the cash flow forgets it.
  • Fit-out expensed in month one. Capital spending should be depreciated, not dumped into the first month's P&L.
  • Only one scenario. An optimistic single case invites scepticism.

6. Checking your own model before you send it

Run these five checks on any model, ours or anyone else's:

  1. Balance sheet balances in every period, not only at year end.
  2. Closing cash equals opening cash plus all net cash flows.
  3. Annual revenue and net income equal the sum of the monthly figures.
  4. Switching to the low case changes revenue, profit, cash and the balance sheet.
  5. No cell in the forecast area contains a typed number where a formula should be.

Our models run these checks on their own Checks sheet with live formulas. Before release, every scenario and year is also recomputed independently outside Excel and must match the workbook within $1.

Sample

Download a sample Full model generated by our engine: a café with five years of monthly projections, all three statements, low / base / high scenarios and the Checks sheet.

Download the sample (.xlsx)

Get projections built on your numbers

StartupModel builds the Full model from a short questionnaire and your key numbers: business type, horizon, monthly or annual detail, your costs and your loan. It costs $349, you pay once, and you keep the Excel file. If it doesn't fit your business, write to us within 7 days and we refund the full amount.

Build my loan projections — $349 · All custom financial models

This guide is general information, not lending, tax or legal advice. Your lender's requirements take precedence.