SBA Form 1010 is the narrative component of an SBA 7(a) application. Lenders use it to underwrite the loan; SBA reviews it for guarantee eligibility. The narrative is where most applications come unstuck, not because the borrower’s credit is bad or the business is unviable, but because the document doesn’t address what the underwriter is reading for.

We’ve shipped multiple SBA-Ready plans, including a $1.8M Colorado approval in Q4 2025. The pattern of what works (and what doesn’t) is consistent enough to write down.

What the underwriter is reading for

An SBA underwriter reading your Form 1010 narrative is checking four things, in order:

  1. Repayment ability. Will the business generate enough cash to service the debt with margin?
  2. Management capacity. Does the borrower have the skills to execute the plan that produces the cash?
  3. Collateral coverage. What backstops the loan if the business fails?
  4. SBA program eligibility. Does the use of funds fit the program’s requirements (no passive investment, no real-estate speculation, US-owned, etc.)?

The first two are where most narratives fall down. The second two are usually a paperwork exercise.

DSCR is the load-bearing number

DSCR, Debt Service Coverage Ratio, is the ratio of cash available for debt service to the debt service itself. Underwriters want DSCR ≥ 1.25 in most cases; some lenders require 1.35 or 1.50 for higher-risk industries.

The calculation:

DSCR = (Net Operating Income + Depreciation + Interest) / Annual Debt Service

Where Annual Debt Service is principal + interest for the year.

What goes wrong in most narratives: the DSCR is calculated once, at a single projection point, and stated as a single number. That doesn’t survive the underwriter’s check. They want to see DSCR projected month-by-month for at least the first 24 months, and annually for the loan term, with a sensitivity analysis around the assumptions that most affect it.

For a typical SBA narrative we build, the DSCR section includes:

  • Monthly DSCR projection for Years 1 and 2
  • Annual DSCR for the remaining loan term
  • Sensitivity: what happens to DSCR if revenue is 80% / 90% / 110% of plan
  • Sensitivity: what happens if input costs increase by 10%
  • The single month or scenario where DSCR is tightest, with the operational response named

If your tightest projected month has DSCR of 1.15, the underwriter will see it. Don’t hide it, explain it, name the response, move on. Hiding it is worse than disclosing it.

Repayment ability narrative

Beyond the math, the underwriter wants prose explaining how the business actually generates the cash flow the DSCR depends on. This is the repayment-ability narrative.

What works:

  • Specific revenue mechanics. Not “we will grow to $2M ARR.” Instead: “We currently bill $42K/month across 14 SMB clients on a $3K average monthly contract. The plan adds 18 new clients per year via [specific channel] at [specific cost], reaching $84K/month by Year 2.”
  • Specific cost structure. Not “operating expenses scale with revenue.” Instead: “COGS is 32% of revenue (primarily payroll for delivery). Marketing is $4K/month fixed plus 6% of new-customer revenue. Tools and software is $2,100/month, scaling at 8%/year.”
  • Specific risks named. “The largest single-month revenue concentration is the [client name] at 14% of total. We mitigate by [specific action]. The contract renews January 2027.”

What doesn’t work:

  • Vague phrases (“we will grow rapidly,” “the market is large,” “we have strong unit economics”)
  • Numbers without source (“we project 40% gross margin” with no math behind it)
  • Risk language that’s just hedging (“there are no significant risks to repayment”)

The narrative an underwriter wants is the narrative a careful operator would write to themselves before borrowing money. That framing, write it as if your own future self has to live with the loan, is the most useful posture.

Use of funds, the schedule format underwriters expect

SBA underwriters want a specific format for the sources-and-uses schedule. Not all do, but enough of them do that it’s worth writing in the expected format from the start.

The format:

USES OF FUNDS
  Working capital                $  450,000
  Equipment & build-out          $  300,000
  Inventory                      $  150,000
  Soft costs (legal, setup)      $   50,000
  Contingency (10%)              $   50,000
                                 ,,,,,,,,,,
  TOTAL USES                     $1,000,000

SOURCES OF FUNDS
  SBA 7(a) loan                  $  750,000   (75%)
  Owner equity injection         $  150,000   (15%)
  Seller financing               $  100,000   (10%)
                                 ,,,,,,,,,,
  TOTAL SOURCES                  $1,000,000

Two things underwriters specifically look for in this schedule:

  1. Owner equity injection of at least 10%, ideally 20%. SBA program requirement, and it signals borrower skin-in-the-game. If the equity is lower, the narrative needs to explain why (e.g., proven cash flow from existing operations, strong personal collateral).

  2. A contingency line at 10%. Underwriters discount narratives that show no contingency budget, it reads as inexperience. The contingency line acknowledges that real businesses cost more than projected.

Common rejection reasons we see

Across the SBA-Ready plans we’ve shipped, the rejections we’ve heard back about (from clients who came to us after a previous attempt was rejected) fall into a few categories:

  • Too-optimistic revenue projections unsupported by the trailing 12 months of actual performance. Fix: anchor Year 1 projections to actuals, ramp into plan numbers gradually.
  • DSCR projected as a single number without sensitivity. Fix: monthly Year 1, annual thereafter, with 80/90/100/110% scenarios.
  • Management resume that doesn’t map to the operational requirements of the plan. Fix: explicitly bridge the resume to the operations the borrower will run.
  • Use of funds that includes ineligible categories (passive real-estate investment, refinancing existing non-SBA debt without business purpose). Fix: rewrite the use to fit SBA program eligibility.
  • Missing or weak collateral disclosure. Fix: enumerate all assets pledged, with current values and any prior liens.

What our SBA-Ready engagements include

The SBA-Ready Plan at $950 covers the full Form 1010 narrative requirements: repayment-ability narrative, DSCR analysis with monthly Year 1 sensitivity, five-year monthly cash flow, sources-and-uses formatted for SBA underwriters, management resume integration, personal guarantor language, and industry-specific exhibits (franchise disclosure, lease specifics, equipment lists where applicable).

We work with your lender on revisions if you authorize it, most lenders prefer the document to match their internal underwriter checklist before they submit it to SBA.

Delivery is seven business days. Two revision rounds included. The work is not guaranteed to approve the loan; the work is guaranteed to be underwriter-grade.

If you’re applying yourself

Three things to get right before submitting:

  1. Calculate DSCR monthly for Year 1, with at least three sensitivity scenarios. Disclose the tightest month and how you’ll manage it.
  2. Write the repayment narrative as a careful operator would write it. Specific revenue mechanics, specific costs, specific risks. Vague phrases get rejected.
  3. Format the use-of-funds schedule as a sources-and-uses table with at least 10% contingency and at least 10% owner equity injection. Match SBA program eligibility for every line.

Get those three right and you’ll be ahead of the median application that crosses an underwriter’s desk.