Projections are your best guess of the future, backed by evidence. Lenders know they will not be exact. What they want to see is that you understand your costs, that your sales assumptions are reasonable and that the business can cover the loan payment.
The four pieces
- Sales forecast: customers × average sale, month by month.
- Costs: cost of goods (what you pay for what you sell) plus fixed costs (rent, insurance, payroll, utilities, software).
- Cash flow: money in minus money out each month, including your loan payment.
- Startup budget: everything you spend before opening, and where the money comes from.
A simple template
| Line | Month 1 | Month 6 | Month 12 |
|---|---|---|---|
| Customers per month | |||
| Average sale ($) | |||
| Sales | |||
| Cost of goods (% of sales) | |||
| Gross profit | |||
| Rent | |||
| Payroll | |||
| Other fixed costs | |||
| Loan payment | |||
| Net cash flow | |||
| Cash balance |
Copy this into a spreadsheet and fill in all 12 months for year one, then yearly totals for years two and three.
Worked example: a small bakery
- 40 customers a day × 26 days × $12 average = $12,480 in monthly sales by month 12 (start lower in month 1).
- Ingredients and packaging at 32% = $3,994.
- Rent $2,800, payroll $3,600, other costs $1,100.
- Loan: $100,000 at an assumed 11% for 10 years ≈ $1,378 per month (check yours in our calculator).
- Net cash flow ≈ $12,480 − $3,994 − $2,800 − $3,600 − $1,100 − $1,378 = −$392.
That negative number is the point of the exercise: this plan does not work yet. The owner could raise prices, lower rent, borrow less or show more customers with evidence. Fixing it on paper is free; fixing it after opening is not.
Make the numbers believable
- Base customer counts on something real: foot traffic, a competitor, pre-orders, contracts.
- Start month one slow and grow gradually.
- Keep a cash cushion of at least three months of fixed costs.
- Write a short paragraph explaining each assumption.
Next steps
Put your projections into your business plan, check your coverage ratio with DSCR made simple and then find startup-friendly lenders.
Frequently asked questions
How many years of projections does a lender want?
Usually three years, with monthly detail for the first year.
How do I make projections believable?
Base them on real quotes and evidence: foot traffic, competitors, pre-orders or contracts. Explain every assumption.
What if my projections show a loss?
Fix the plan before you apply: adjust prices, lower costs, borrow less or find stronger evidence of demand.
Take the next step
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Educational information, not legal or financial advice. We are not a lender and are not affiliated with the SBA. Disclaimer