What an SBA Lender Actually Checks in a Start-Up’s Projections (the Rule, Quoted)

Most advice about SBA loans is secondhand. The primary source is a document called SOP 50 10 8, the Standard Operating Procedure the Small Business Administration hands to every lender in the 7(a) and 504 programs. It took effect on June 1, 2025, and version 8.1 replaced it on October 1, 2026 with the same credit-analysis structure. It is 400-odd pages, and about two of them decide whether a start-up's projection is acceptable.

Here are those two pages, quoted, with a translation.

The rule, word for word

For a Standard 7(a) loan, the kind above $350,000, the SOP tells the lender what its credit memorandum must contain under "Financial analysis of repayment ability." For existing businesses that is three years of tax returns. For everyone else:

> "For start-ups, new businesses, changes of ownership, and other applications based on projections, include detailed projections, including the supporting assumptions that reflect a debt service coverage equal to or greater than 1.15 within 2 years from loan funding." (Section B, Chapter 1, page 127)

Then it tells the lender what to do with those projections:

> "For cash flow projections, the Lender must calculate the debt service coverage ... and provide the assumptions supporting the projected cash flow coverage, including as applicable: a) Justification for revenue growth, i.e., new product lines, sales channels, and new production facilities; b) Justification for any reduction in expenses; and c) A comparison to current industry trends." (page 128)

Two definitions sit next to that rule. A "start-up" is a business that has been "generating revenue from intended operations" for one year or less. And every 7(a) loan to a start-up requires an equity injection of at least 10 percent of total project cost, meaning all the costs needed to open, not just the loan amount (page 168).

Loans of $350,000 or less are 7(a) Small Loans and run through a lighter process. The application is first screened on a FICO Small Business Scoring Service score, minimum 165 at the time of the SOP, and the lender's memo has to cover "past earnings, projected cash flow, and future prospects" (pages 165 to 167). If the score comes back too low, the file "must be processed following the procedures for Standard 7(a) Loans," which puts the full projection rule above back in play. In practice most banks ask a start-up for the same projection package either way, because the SOP also says the cash flow of the business "is the primary source of repayment, not any expected recovery from the liquidation of collateral."

What "supporting assumptions" means at the desk

An assumption is a number with a reason attached. "Revenue of $486,000 in year two" is a number. "180 customers a day at a $7.50 average ticket, 360 days" is an assumption, and now the loan officer has something to argue with. That is the point. A projection the officer cannot argue with is a projection the officer cannot approve, because the SOP requires the memo to carry the assumptions, not just the total.

Five assumptions get poked on nearly every start-up file:

1. 1Average ticket. What one customer spends per visit. The officer will compare it with the menu, the price band of the competitors nearby and what the industry reports. A ticket set 10 percent high is the most common quiet inflation in a projection.
2. 2Customers per day. The officer wants to know where they come from: how many people live and work within reach, how many competitors already serve them, and what share of that traffic a new entrant can realistically win in the first year.
3. 3The ramp. Nobody opens at full volume. A projection that starts month one at the mature run rate reads as inexperience. The rule gives you two years to reach 1.15, so show the climb.
4. 4Labor as a share of revenue. The officer knows the industry range. If a coffee shop is projected at 18 percent labor when the trade runs near 30, the memo will say so.
5. 5Rent as a share of revenue. The lease is known to the dollar, so rent becomes a test of the revenue line. A $4,500 lease at 11 percent of revenue is normal; at 20 percent it means the revenue line is probably wrong, not the lease.

Notice that the rule also asks for "justification for any reduction in expenses." If your year-two costs fall as a share of revenue, say why. If you cannot, let them stay flat.

What "a comparison to current industry trends" means

This phrase is the one most applicants skip, and it is the cheapest to satisfy. The lender has to show that the projection is consistent with what the industry is actually doing, in that place, now. The data is public and free:

• •Bureau of Labor Statistics, Quarterly Census of Employment and Wages. Employment, establishments and average wages by detailed industry, down to the county, updated quarterly. It answers "is this business type growing or shrinking here?" and anchors the labor assumption. Neur's state rankings are built from it.
• •Census Bureau, County Business Patterns. Establishment counts by industry and county, which turns into businesses per 100,000 residents. It answers the saturation question. The saturation check runs it for 14 common business types.
• •Census Bureau, American Community Survey. Population, households and income within a radius of the location, which bounds the customers-per-day assumption.
• •Federal Reserve, Small Business Credit Survey. What applicants like you actually got approved for, and why they were turned down.

Cite the vintage and the geography for each one. A memo that says "QCEW, Hidalgo County, 2026 Q1" is a memo the officer can check in a minute.

A worked example: a coffee shop and a $250,000 loan

Year two is the year the rule judges, so here is a year-two projection for a 1,400 square foot coffee shop with a $250,000 7(a) loan over 10 years. At a 10.25 percent rate the payment is about $3,340 a month, or $40,100 a year.

It passes, at 1.21 against the 1.15 floor. Now move one assumption. Drop the ticket from $7.50 to $6.75, a 10 percent change the officer could justify from the competitors' menus:

One assumption, and the file goes from approvable to declined. That is why the officer pokes the ticket and the customer count before anything else, and why the SOP makes the lender write the assumptions down. Two details from the table are worth repeating. The SOP lists "Owner's Draw" among the adjustments to cash flow, so a projection that forgets the owner needs to eat will be corrected at the desk. And year one, with a ramp, will usually not cover the payment at all; the rule gives you until year two, so show year one honestly and let year two carry the file.

The three mistakes that get a package sent back

1. 1Totals without assumptions. A revenue line with no customer count or ticket behind it cannot be put in the memo as the SOP requires, so the officer has to build the assumptions for you, and will build them conservatively.
2. 2No industry comparison. The memo must contain one. If you do not supply it, the lender pulls whatever national average is handy, which is rarely kinder than the local number.
3. 3Year one at full speed. Projections that start at the mature run rate signal that the applicant has not run a business before, which is the one thing a start-up file most needs to disprove. The SOP asks the memo to address "the depth of management experience in this industry," and the shape of the ramp is the first evidence of it.

Audits by the SBA's Office of Inspector General have cited projections the lender did not support as a reason loans were improperly approved. Lenders know this, and it is why a start-up file with its assumptions documented moves faster than one with a bigger number and no reasons.

What the SOP does not require

It does not require a feasibility study for a 7(a) loan. It does not say who may prepare the projections or the market section, and it sets no credential. For 504 loans it says independent reports "may be beneficial in mitigating any weaknesses identified in the credit analysis," and lists the cases where the SBA itself may ask for a feasibility study, the first of which is "market saturation by industry type and location" (page 356). That is the whole of it. What the rule asks for is reasons: a customer count that comes from somewhere, a ticket that matches the market, a labor share that matches the trade, and a comparison to what the industry is doing in that county this year.

A Neur Lender Report is built to be the independent support for those assumptions: the residents and workers within reach, the competitors and their price bands, the county employment trend from the QCEW, and the saturation figure from County Business Patterns, each with its dataset, vintage and geography printed next to it. The guide to what a lender reads first covers the order the rest of the file is read in.