Applying for a small business loan raises a lot of questions, and “do I need a business plan?” is one of the most common. The answer depends on the lender and the type of financing you’re pursuing. Some require a full formal plan. Others don’t. But almost every lender needs to understand the same three things: how your business earns money, how you plan to use the funds, and how you’ll repay the loan.

This guide walks through when a business plan is required, what lenders evaluate in each section, how to write a plan that strengthens your application, and what to offer if you’re not quite ready to put one together yet.

Do you need a business plan to get a business loan?

Not always, but more often than borrowers expect.

Traditional banks and SBA lenders typically require a business plan as part of the application process. Online and alternative lenders tend to be more flexible, making decisions primarily on recent revenue and bank statements rather than a lengthy written document. Even when a formal plan isn’t on the checklist, lenders still need a clear picture of your business’s financial health and your plan for repayment.

According to the Kansas City Fed’s Small Business Lending Survey, weak borrower financials were cited as a contributing factor in approximately 70% of loan denials in 2024. A well-prepared business plan directly addresses those concerns — giving lenders the financial context and clarity they need to make a confident decision.

When lenders typically require a business plan.

Lenders are most likely to ask for a formal business plan when they need additional context to assess risk. That tends to come up in these situations.

SBA loans

SBA (Small Business Administration) 7(a) and 504 loans carry more documentation requirements than most financing options. While the SBA itself doesn't explicitly require a business plan, many participating SBA lenders expect a plan that  demonstrates business viability, a clear use of funds, and realistic financial projections. The SBA approved more than 103,000 loans totaling $56 billion in 2024, meaning lenders are processing significant application volume and rely on complete, well-organized documentation to move efficiently.

Larger loan amounts and longer terms

The more money involved, the more context lenders need. Term loans, commercial real estate financing, and acquisition loans often require a full business plan because repayment depends on a longer performance runway. Lenders want to understand not just where your business stands today, but where it’s headed — and whether it can sustain growth over a multi-year repayment period.

Startups and newer businesses

When your time in business is limited, lenders have fewer historical financials to work with. A business plan fills that gap. It lays out your revenue model, target market, pricing strategy, and projected cash flow. These make the case for your business’s future performance when the track record is still being established.

Complex or high-risk files

A recent credit hiccup, a dip in revenue, seasonal cash flow patterns, or a higher-risk industry can all trigger a more detailed review. A business plan won’t erase those factors, but it gives lenders the context they need: what happened, what has changed, and why repayment is still a realistic outcome.

What lenders are looking for in your business plan.

Every section of a business plan is read through one lens: can this business reliably repay the loan?

More specifically, lenders are evaluating four things.

  • Repayment capacity: cash flow statements and financial projections show whether projected income can cover operating expenses and new debt service — and by how much. 
  • Use of funds: a vague answer like “working capital” isn’t enough; lenders want to see exactly where the money goes and why that use supports revenue or operational stability. 
  • Business viability: market analysis and competitive positioning give lenders confidence that your revenue assumptions are grounded in data, not optimism.‍
  • Management credibility: lenders assess whether the people running the business have the experience to execute the plan — especially critical for newer businesses without an established financial track record.

How to write a business plan for a business loan: Section by section

Most lenders, including SBA lenders, expect a business plan organized around a standard structure. Here’s what belongs in each section, framed for a lending audience.

Executive Summary

The executive summary is the first thing a lender reads, and it shapes their initial impression of your entire application. Keep it to one to two pages and cover: your business name, location, and legal structure; a brief description of what your business does and who it serves; your competitive advantage; a snapshot of your financial position; and your loan request — the amount, type of financing, and intended use of funds.

One practical note: write this section last. Once you’ve completed the rest of the plan, you’ll have a much clearer picture of the full story, and the summary will be sharper and more persuasive for it.

Company description

This section goes deeper on your business: when it was founded, your legal structure and ownership, and the specific problem you solve for your customers. A strong company description explains what makes the business distinct — a proprietary process, a specialized team, a geographic advantage, or a product line that’s difficult for competitors to replicate. Lenders typically use this section to understand the foundation the financial projections are built on.

Market analysis

A strong market analysis demonstrates that your revenue assumptions are grounded in reality, not wishful thinking. Cover the size and growth trajectory of your target market, key customer demographics, and relevant industry trends. Then address the competitive landscape — who your competitors are, what they do well, and where your business holds a clear edge.

Lenders use this section to pressure-test your projections. If you’re forecasting strong growth, your market analysis needs to support that with evidence.

Management team

List the key people running the business, their roles, and the experience that’s directly relevant to execution. Focus on what qualifies each person: prior industry roles, financial management experience, operational track record, or specialized technical expertise.

If you’re running a lean team, use this section to highlight your broader support network — advisors, accountants, attorneys, or industry mentors who add depth to your management profile. Lenders aren’t looking for a large team. They’re looking for the right experience in the right roles.

Products and services

Describe what you sell, how you price it, and how you generate revenue. Cover your margins, your delivery model, and any barriers that protect your business from competition — intellectual property, exclusive contracts, or specialized expertise. If you have recurring revenue or a strong existing customer base, include it here. It signals demand and meaningfully reduces perceived risk.

Marketing and sales strategy

Explain how you find customers, convert them, and retain them over time. This section doesn’t need to be a full marketing plan, but it should cover your primary acquisition channels, your sales process, and any key partnerships or referral relationships that drive revenue. The goal is to give lenders a credible, specific path from where you are today to the revenue figures in your financial projections.

Financial projections

For most lenders, financial projections are the section they’ll spend the most time reviewing. Include:

  • Income statement projections (profit and loss) for three to five years — monthly detail for year one, annual summaries for years two through five
  • Cash flow statements showing when money comes in and goes out, and whether the business maintains a positive cash position across the full loan term
  • Balance sheet projections reflecting expected assets and liabilities at the end of each projected period
  • Break-even analysis showing the revenue level at which the business covers all operating costs

The assumptions behind your numbers matter just as much as the figures themselves. Explain your reasoning — what growth rate you’re using and why, how pricing may shift, what the key cost drivers are. Lenders who can follow the logic are far more likely to find the forecast credible.

When applying for an SBA loan, five years of projections is standard, and cash flow statements should clearly show comfortable debt service coverage across the full repayment term.

Funding request

A clear, detailed funding request typically includes the loan amount, the type of financing being sought — term loan, SBA 7(a), line of credit — and a breakdown of exactly how the funds will be used. Common line items include equipment, inventory, staffing, working capital, facility costs, and debt refinancing.

Then connect the dots: show how each use of the loan supports revenue generation and your ability to repay. A precise, well-reasoned funding request builds lender confidence. A vague one invites follow-up questions and slows the process down.

What if you don’t have a business plan yet?

If you’re applying for a smaller loan from an online or alternative lender, a formal business plan may not be required. Many of these lenders make decisions based primarily on recent financial performance — typically the last three to six months of bank activity — rather than a lengthy written document.

In those cases, lenders may accept a combination of:

  • Business bank statements (typically three to six months, sometimes up to 12)
  • Personal and business tax returns from the past two to three years
  • A current profit and loss statement and balance sheet
  • An accounts receivable aging report, for B2B businesses
  • A short revenue forecast and expense estimate for the next 12 months
  • A written “use of funds” summary tied to your repayment plan

Even without a formal plan, expect to explain what the funding is for and how your business generates the cash flow to repay it. Strong financial documents paired with a clear written explanation can substitute for a full plan in many scenarios.

Keep in mind that loan size, credit profile, industry, and time in business all affect what a lender asks for — even from providers who don’t typically require a formal plan. A larger request, a thinner credit file, or a newer business can trigger a more thorough review at any lender type.

What to consider next.

Understanding what lenders evaluate is a useful starting point. From here, it may help to explore which loan types are most commonly used for your intended purpose, what documentation a specific lender type typically asks for, and how your current financials compare to general qualification benchmarks. The more clearly a business owner understands the landscape before applying, the better positioned they tend to be to find financing that aligns with their situation.

Lendio’s marketplace allows business owners to compare loan options across multiple lenders using a single application, which can help clarify what options may be available based on the business’s financial profile. Eligibility and terms vary by lender and loan type.