Guide
Writing projections an underwriter will actually accept
For startups and acquisitions the projection is the underwriting. Here is how to build one that survives scrutiny rather than one that reads as optimism.
An established business borrowing against existing cash flow usually does not need a business plan; the tax returns are the plan. Startups, acquisitions, and expansions into something new do, and in those files the projection is not supporting material — it is the credit decision.
What an underwriter does with your projection
- Finds the revenue assumption and asks where it comes from.
- Checks whether the gross margin matches the industry and your own history.
- Confirms that the projection includes a market-rate salary for you. A projection where the owner takes nothing is not a projection, it is a wish.
- Adds the new debt service and computes coverage. This is the number that decides the file.
- Stress-tests it: what happens at 80% of projected revenue? If coverage breaks, so does the deal.
Where defensible revenue assumptions come from
- A franchisor's Item 19 Financial Performance Representation — the single strongest source available to a startup, because it is comparable unit data the franchisor is legally accountable for.
- The target's own history, for an acquisition. Use the trailing twelve months, not the best year.
- Signed contracts or letters of intent from named customers.
- Industry benchmarks — revenue per square foot, per seat, per truck, per chair. Trade associations and IBISWorld-type sources publish these.
- Your own comparable location, if you are expanding.
What does not work: total addressable market multiplied by a market share you hope to win. Underwriters see that structure constantly and it signals inexperience immediately.
Structure of the package
- Executive summary, one page
- What the business does, what the money buys, how much, and how it gets repaid. If a reader stops here they should still be able to make a decision.
- The operator
- Your resume, reframed around why you can run this specific business.
- Market and competition
- Short. Specific. Named competitors, not adjectives.
- Use of proceeds
- Itemized, to the dollar, tying exactly to the amount requested.
- Projections
- Monthly for year one, quarterly or annual for years two and three. Income statement, balance sheet, and cash flow — all three, and they must tie.
- Assumptions page
- The most important page in the document. Every driver, stated, with its source. This is what gets read closely.
Free help most people never use
Small Business Development Centers are funded through the SBA and hosted at universities and economic development agencies nationwide. Their advisors will sit with you and build these projections at no cost. SCORE offers free mentoring from experienced operators. Women's Business Centers and Veterans Business Outreach Centers serve specific populations. None of them charge, and their advisors have read hundreds of these documents.
Questions people actually ask
How many years of projections do lenders want?
Two to three years is standard, with month-by-month detail for year one. More than three years is not treated as more rigorous — it is treated as less credible, because nobody can forecast a small business five years out.
Should I pay someone to write my business plan?
Get help with the financial model if you need it. Do not outsource the narrative. Underwriters can tell when a plan was purchased, and the interview where you cannot explain your own assumptions is worse than a rougher plan you wrote yourself. An SBDC advisor is free and better than most paid services.
What gross margin will an underwriter expect?
Whatever your industry runs at, and they will check. If your projection shows a margin materially above the industry norm, you need a specific, verifiable reason — a supply agreement, a process advantage, a pricing position you can evidence. "We will be more efficient" is not one.