For SBA lenders
Short answer
Lenders evaluate revenue and cash flow projections by comparing them against historical performance, industry benchmarks, market conditions, and the borrower's specific business plan, ensuring assumptions are realistic and adequately supported.
Prudent lending requires a critical assessment of financial projections, especially for new or acquiring businesses. Lenders must analyze the underlying assumptions (e.g., sales growth, cost of goods sold, operating expenses) for reasonableness. This involves comparing them to the seller's historical performance, industry averages, and known market trends. Unsubstantiated or overly aggressive projections can indicate an unsustainable business model and higher credit risk.
A borrower's projections for an acquired business show 20% revenue growth in year one, while the historical average was 5%. The lender requires a detailed explanation, including market research, a new marketing strategy, and evidence of increased capacity, to justify the aggressive growth. If the justification is weak, the lender may adjust the projections to a more conservative level for underwriting.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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