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The loan narrative, use of funds and repayment rationale lenders read, plus sheets for tracking your documents and working out your debt service coverage ratio.
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What you get
Pack of 6 files: 3 documents, 3 spreadsheets
Financial SummaryThistledown Coffee Roasters LLC. Raw financials, translated into the format a lender reads.
| Line | Amount |
|---|---|
| Revenue, trailing 12 months | $1,240,000 |
| Net income | $48,000 |
| Cash available for debt service | $102,100 |
| Total annual debt service | $70,520 |
| Debt service coverage ratio | 1.45 |
DSCR Calculation| Step | Item | Amount |
|---|---|---|
| 1 | Net income | $48,000 |
| 2 | Add back interest | $18,200 |
| 3 | Add back depreciation | $31,800 |
| 4 | Add back amortization | $4,100 |
| 5 | Cash available for debt service | $102,100 |
| 9 | Total debt service, existing plus proposed | $70,520 |
| 10 | Ratio, line 5 ÷ line 9 | 1.45 |
Every addback traces to a source line, the P&L or the fixed asset schedule, so the ratio is not a single unexplained total.
Checklist| Document | Status |
|---|---|
| Business tax returns, last 3 years | Have |
| Business bank statements, 12 months | Have |
| Existing debt schedule | Have |
| Personal financial statement | Requested |
| Equipment quotes | Have |
A small business loan application is the package a lender uses to decide whether your business can repay. It pairs a short narrative and a breakdown of how you'll spend the money with the documents behind them: financial statements, tax returns and a list of your current debts. A strong application also works out the debt service coverage ratio, the lender's key number, and shows where every figure in it came from.
Build everything around that ratio. Lenders expect cash flow, not collateral, to repay the loan, so showing the math up front answers their first question before they ask it.
In the US, the Small Business Administration (SBA) sets rules for the loans it guarantees, and they show how a careful lender thinks. Under those rules, cash flow is the primary source of repayment, not the sale of collateral1. If it can't cover the payments, the loan must be declined, however much collateral there is.
What lenders check, and what answers it
| Area | The lender's question | What answers it |
|---|---|---|
| Repayment | Can cash flow cover every payment? | Your debt service coverage ratio |
| Credit | Do you pay debts on time? | Business and personal credit reports |
| Collateral | What backs the loan if payments stop? | Business assets, property and what the loan buys |
| Equity | How much of your own money is at risk? | Your cash in the deal and personal financial statements |
| Management | Can you run the business? | Your narrative and track record |
When the Federal Reserve surveyed 6,525 small employer firms in late 2025, 42% of applicants received all the financing they sought and 22% received none2. Those turned down for part or all of it most often cited strict lender requirements (46%), too much existing debt (37%) and a low credit score (30%).
Check your own credit before a lender does. SBA notes that a new business's loan eligibility is typically based on its owner's personal credit score3. Get your free reports from AnnualCreditReport.com and dispute any errors before you apply.
Build the amount up from quotes, not down from a round number. List each item with its dated quote, and make the list add up to exactly what you request. SBA's 7(a) rules call for a detailed list of equipment to be bought, with cost quotes1. The purposes on SBA's borrower form should also total the loan amount.
New equipment can take months to pay for itself, so include working capital for the materials and labor it needs before the extra sales arrive.
A longer term lowers each year's payments and raises your coverage ratio, but match it to the life of what you're buying. SBA's rules generally keep equipment loans to 10 years and real estate loans to 251. Before you settle on an amount, check that the new payment fits your tightest weeks with a cash flow forecast.
Ask your lender for its own list first. SBA notes that the contents of a loan application vary with the loan's size and the lender's processing method4. SBA's rules for 7(a) loans, its main program, make a good baseline.
Documents for an SBA 7(a) loan application
| Document | What it shows | Watch for |
|---|---|---|
| Business tax returns | Three years of what you reported to the IRS | The lender checks them against IRS transcripts |
| Financial statements | Three year-end balance sheets and income statements, plus this year to date | Interim statements dated within 120 days of submission |
| Debt schedule | Every business debt: lender, balance, payment and maturity | Loans from owners belong on it too |
| Personal financial statement | Assets and debts of each owner of 20% or more | Signed within 90 days; SBA Form 413 works |
| Bank statements | Cash moving through your main operating account | Debt payments missing from your schedule |
| Quotes and lease | What the loan buys and where you operate | Dated, itemized quotes that match your use of funds |
If your loans are scattered across statements, a debt schedule template gathers them in one place.
SBA defines the ratio as operating cash flow divided by debt service1. Operating cash flow means earnings before interest, taxes, depreciation and amortization (EBITDA). Debt service is a year of required principal and interest on every business debt, including the new loan.
Start from net income
Use your last full year, from the statements and tax return the lender will see.
Add back interest, depreciation and amortization
Add income tax too if the business pays its own. The result is your EBITDA.
Adjust the way a lender would
Lenders may subtract owner draws, distributions for owners' taxes, one-time income and equipment paid for in cash. Do it yourself and say why.
Total a year of payments
Add every existing loan payment to the new loan's payment at the quoted rate and term.
Divide
Cash flow over debt service is your ratio. Below 1.0, the business can't cover its payments.
Thistledown Coffee Roasters wants $220,000 over seven years for a packaging line, a van, installation and working capital.
Cash available: net income $48,000 + interest $18,200 + depreciation $31,800 + amortization $4,100 = $102,100
Debt service: equipment loan $22,400 + credit line interest $3,600 + new loan $44,520 = $70,520
Ratio: $102,100 ÷ $70,520 = 1.45
SBA sets the minimum by loan type: 1.10 for 7(a) Small loans of $350,000 or less, 1.15 for standard 7(a) and 504 loans, and usually 1.25 to buy a business1. Standard 7(a) loans also need 1.0 on a global basis, counting affiliated businesses and the owners' personal income and obligations. Banks lending without an SBA guarantee set their own minimums, so ask yours.
If your history falls short, or the business is new, SBA lenders can work from two years of detailed projections, with assumptions they can test. If the numbers still don't work, borrow less, stretch the term or put in more of your own cash.
When to bring in your accountant
Call your accountant if your books and tax returns don't match, the lender wants CPA-prepared statements or you're unsure an adjustment is fair. This guide is not tax or legal advice.
Your lender writes a credit memo to support its decision, so hand it the material. For most SBA loans, that memo must cover the business's history, how long current management has run it, their industry experience and who runs things day to day1. Answer those points in about a page.
Explain any dip in revenue or profit before the lender finds it. If the lender wants a full business plan with projections, the business plan writer turns your notes into one.
Before you submit
The template on this page has each piece, filled in for a made-up coffee roaster so you can see how they fit. Open it with Edit with AI and River builds the ratio from your own statements, naming the source of every figure.
Use the files as they are, or open them in River. Send River your last two or three years of financial statements and tax returns, your current debt schedule, and how much you're borrowing and why. It builds the Financial Summary in a format lenders read and calculates your debt service coverage ratio, with every add-back traced to its source line. Missing documents go on the Document Checklist.
Ask River to try a different amount, rate or term and it recalculates the ratio. It flags anything under 1.25, so you can test a smaller loan or longer term before you apply. It won't promise an approval, rate or term; that decision belongs to the lender.
Download the three Word documents and three CSV sheets free, or open the template in River and send it your financials.
Work through the Document Checklist, marking each item Have, Requested or Not applicable, and note who you asked.
Fill in the Financial Summary and coverage calculation from your statements, or let River build both with every source named.
Update the Loan Narrative, Use of Funds and Repayment Rationale, check the totals match your request, then send it to your lender.
Expect two or three years of business tax returns and financial statements, plus a current profit and loss statement and balance sheet. Lenders also want recent bank statements and a schedule of your existing debts. Each owner of 20% or more usually adds a personal financial statement. Bring quotes for anything you're buying and a copy of your lease if you rent.
For most SBA-backed loans, a minimum of 1.10 to 1.25, depending on the program and what the money is for; buying a business usually needs 1.25. Without an SBA guarantee, each bank sets its own minimum. At 1.0, the business earns just enough to make its payments, with nothing to spare.
Usually. SBA requires an unlimited personal guarantee from anyone who owns 20% or more of the business. Guarantees are common across small business borrowing: in the Federal Reserve's 2025 survey, 59% of small employer firms with debt had used one. Read the guarantee carefully, ideally with a lawyer, before you sign.
Ask the lender for its specific reasons. In the US, Regulation B5 entitles business applicants to them if they ask in writing within 60 days of being turned down. "Internal standards" alone isn't an acceptable reason. Fix what the lender names, such as debt, credit or missing documents, then reapply or try another lender.
Often, and especially if the business is new, because the lender needs projections to judge repayment. SBA notes that lenders commonly ask for a traditional, detailed plan. An established business with steady numbers may need only a narrative and use of funds, so ask your lender what it expects before writing a full plan.
Yes. Download the three Word documents and three CSV sheets with no signup. They come filled in for a made-up coffee roaster borrowing $220,000, so you can see how each file works before you replace the numbers. Edit with AI opens the same template in River.
It opens the template in a free River workspace. River asks for two or three years of financial statements and tax returns, your debt schedule and what you're borrowing for. It then builds your Financial Summary and coverage ratio, naming the source of each add-back, and tracks missing documents. Approval, rate and terms stay the lender's call.
U.S. Small Business Administration. “SOP 50 10: Lender and Development Company Loan Programs.” sba.gov (opens in a new tab)
Federal Reserve Banks. “2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey.” fedsmallbusiness.org (opens in a new tab)
U.S. Small Business Administration. “Plan your business.” sba.gov (opens in a new tab)
U.S. Small Business Administration. “7(a) loans.” sba.gov (opens in a new tab)
Consumer Financial Protection Bureau. “§ 1002.9 Notifications.” consumerfinance.gov (opens in a new tab)
Written by
Co-founder & CEO, River
Chandler has spent the last six years working in AI, building tools for millions of users and Fortune 100 companies. In 2025, he co-founded River to build a new kind of operating system for AI agents.