Why Your SBA or Bank Business Loan Needs a 24-Month Narrative — And How to Get It Right

When applying for an SBA or bank business loan, most business owners expect to provide tax returns, profit-and-loss statements, and a set of financial projections. What many don’t realize is that one of the most critical (and often overlooked) components of the loan package is the narrative that supports your pro forma.

This narrative isn’t just busywork. It’s your opportunity to tell the story behind your numbers — month by month, step by step — to show that your financial projections aren’t just spreadsheets, but are rooted in strategy, experience, and a realistic understanding of how your business will grow.

Let’s break down what the lenders looks for in a 24-month narrative, why it matters, and how to write one that builds lender confidence.

What Is a Monthly Narrative?

A monthly narrative is a written explanation that walks the lender through your financial projections for each of the 24 months in your pro forma. It explains:

• How your revenue will be generated

• What changes in your cost structure are expected

• Why certain months have peaks or dips

• When major investments, hires, or campaigns are planned

• How your cash flow supports business sustainability

It’s not about sounding fancy. It’s about sounding informed, prepared, and grounded in reality.

What the Lender Is Really Looking For

Here’s what lenders and SBA reviewers want to see:

1. Consistency between narrative and numbers

   If your pro forma shows a jump in revenue in Month 7, your narrative should explain why (e.g., a new marketing campaign, referral milestone, or contract start).

    

2. Reasonable growth

   Avoid unrealistic “hockey stick” growth curves without explanation. Growth should reflect your marketing strategy, team capacity, and market size.

    

3. Evidence of planning

   The narrative should demonstrate that you’ve thought through your operations month-to-month: staffing, inventory, systems, and marketing.

    

4. Financial discipline

   SBA lenders love entrepreneurs who manage cash well. Show that you’re not just profitable, but responsible — setting aside reserves, planning for taxes, and avoiding bloat.

    

How to Structure Your 24-Month Narrative

We recommend breaking the 24 months into phases and then writing short, clear summaries for each month.

Months 1–3: Launch & Setup

• Introduce your product or service

• Hire your core team

• Activate marketing and customer outreach

• Begin generating steady early revenue

Months 4–6: Early Growth & Adjustments

• Refine systems and processes

• Build repeat customer base

• Adjust marketing and inventory as needed

Months 7–9: Scaling Smartly

• Expand outreach, reps, or services

• Increase production or fulfillment capacity

• Monitor COGS and customer acquisition cost

Months 10–12: Year-End Positioning

• Stabilize monthly revenue

• Maximize year-end performance

• Optimize expense structure for profitability

Months 13–15: Year 2 Acceleration

• Leverage prior year’s traction

• Introduce secondary revenue streams or higher-ticket items

• Evaluate performance of marketing and staff

Months 16–18: Refinement & Expansion

• Adjust pricing, expand regionally, or introduce automation

• Reinforce cost controls and staff development

Months 19–21: Mature Operations

• Predictable monthly revenue

• Refinement of delivery and customer service

• Evaluate financing or new capital options if needed

Months 22–24: Preparing for Year 3

• Assess long-term growth trajectory

• Build reserves

• Position for expansion, hiring, or acquisition

How to Write Each Monthly Entry

Each month’s entry should be about 3–6 sentences, addressing:

• Revenue: What’s driving it?

• Expenses: Any fluctuations or expected changes?

• Milestones: Contracts, campaigns, hires, or expansions

• Cash Position: Stability or strategic reinvestment

Example:

Month 5: “Sales increase modestly due to a steady stream of returning customers and targeted outreach to new leads. Cost of goods sold remains in line with projections. We onboard a part-time marketing contractor to support email campaigns. Operating expenses rise slightly due to increased software usage and subscriptions. Cash flow remains positive, with a growing reserve.”

Final Thoughts

Your pro forma shows what your business will do. The narrative shows how you plan to do it.

If you want to secure SBA financing — especially for startups or expansions — this part of your loan package deserves serious attention. Take the time to write a strong narrative that mirrors your numbers, anticipates lender questions, and demonstrates that you’re not guessing — you’re planning.

Need help building your SBA narrative or projections?

Let’s talk — I help business owners bridge the gap between vision and finance every day.

Book an appointment now

Marcelo Bermudez, CEPA

Chief Executive Officer

Shōkunin, Inc.

Capital and Strategy for Commercial Real Estate and Business

E – mb@marcelobermudezinc.com

C – 213.453.9418

https://www.marcelobermudezinc.com

https://www.linkedin.com/in/marcelobermudez/