Every deal has a story. The question is whether you tell it or the underwriter writes it themselves.
When a referral partner submits a file without a deal narrative, the underwriter does not just evaluate the numbers in a vacuum. They fill in the blanks. They make assumptions about why revenue dropped in year two, what the owner does with their personal draws, why there is a UCC filing from 2022, and what the use of proceeds actually means for the business’s ability to repay. And those assumptions are almost never as favorable as the truth would have been.
A well-structured deal narrative does not spin the facts. It contextualizes them. It answers the questions the underwriter is going to ask before they ask them, in an order that builds confidence rather than creating doubt. And it gets deals to yes faster because the person reading it does not have to reconstruct the story from raw documents.
Here is how to build one that works.
Start With the Business, Not the Numbers
The first section of a deal narrative should answer one question: what does this business actually do and why does it work?
Not a generic description. Not “a retail establishment providing consumer goods to the local market.” A specific, concrete description that gives the underwriter a real picture of the operation. How long has it been in business. What it sells or delivers and to whom. What makes it defensible in its market. Who the customer base is and how concentrated or diversified it is.
Underwriters are human beings (for now at least) who approve or decline deals. A business they can picture is easier to approve than one that is described in abstraction. Give them something real to anchor to before you ask them to trust the numbers.
Tell the Financial Story in Sequence
The financial section of a deal narrative should walk through the performance history in plain language, year by year if necessary, and explain what happened.
Not just the numbers. The narrative behind the numbers. Revenue was up 22 percent in year two because the business added a second location. Revenue dipped in year three because of a supply chain disruption that affected the whole industry and has since resolved. Owner compensation was elevated in year one because the business was structured differently and has since been normalized. Gross margin improved because a major vendor contract was renegotiated.
Every significant variance in the financial history needs an explanation. Every add-back needs a one-line justification. Every number that looks unusual needs context before the underwriter finds it and starts wondering.
The goal is a financial story that a smart person could follow without looking at the tax returns. If you achieve that, you have written a good narrative.
Address the Hard Stuff Before They Find It
This is the part most referral partners skip and the part that matters most.
Every file has something in it that looks bad out of context. A credit event. A slow year. A UCC filing. A period of elevated draws. A related-party transaction. A prior business that did not work out.
The worst thing you can do is leave those items for the underwriter to discover. When they find something you did not disclose, they question everything else in the file. The deal slows down. Conditions multiply. Approvals become contingent on explanations that should have been in the memo from the start.
Address every difficult item directly in the narrative. Name it. Explain it. Provide context. Show what has changed if something has changed. A problem with a good explanation is a manageable obstacle. A problem the underwriter finds on their own is a credibility issue.
Make the Use of Proceeds Specific and Logical
Lenders are not just evaluating whether a business can repay the debt. They are evaluating whether the stated use of proceeds makes sense for the business and is consistent with the financial story being told.
A vague use of proceeds – “working capital and business expansion” – raises more questions than it answers. A specific one – “purchase of two additional service vehicles to support a signed contract with a regional facilities management company that begins in Q2, with a projected revenue increase of $340,000 annually” – tells the underwriter exactly where the money is going and why the business will be able to service the debt after it is deployed.
The more specific the use of proceeds, the easier it is for the underwriter to connect the loan to a business outcome. That connection is what makes a loan feel logical instead of speculative.
Close With the Borrower’s Stake in the Outcome
The last section of a deal narrative should leave the underwriter with a clear picture of why this borrower is motivated to make this loan work.
How long have they been in business and what have they built. What they have personally invested in the operation. What the business means to them and to their employees. What happens to the business if this financing closes versus what happens if it does not.
This is not sentiment for its own sake. Lenders make decisions about people, not just numbers. A borrower who has thirty years in their industry, has never missed a debt obligation, and is using this loan to make a strategic investment in a business they have built from nothing is a fundamentally different risk profile than one who is borrowing opportunistically with no particular skin in the game. The narrative is where that difference gets communicated.
The Deal Narrative Structure
| Section | What It Covers | Length |
|---|---|---|
| Business overview | What it does, how long, why it works, who the customers are | One to two paragraphs |
| Financial history | Year-by-year performance with explanation of significant variances | Two to three paragraphs |
| Add-back schedule | Itemized add-backs with one-line justification for each | Table format |
| Difficult items | Every red flag addressed directly with context and resolution | One paragraph per item |
| Use of proceeds | Specific deployment plan tied to a business outcome | One paragraph |
| Borrower profile | Experience, personal investment, motivation, what is at stake | One paragraph |
The Narrative Is Your Argument
I want to come back to the frame I started with, because it is the one that matters most.
Every deal has a story. The underwriter is going to construct that story one way or another. The question is whether they construct it from a well-organized, complete, and compelling narrative you provided – or whether they construct it themselves from raw documents, unanswered questions, and the most conservative interpretation of every ambiguity.
The referral partners who close the most deals are the ones who understand that their job is not just to collect documents and submit them. Their job is to make the case. The credit memo and the deal narrative are where that case gets made.
If you have a deal that has some complexity to it and you want to think through how to frame the narrative before you submit, that is exactly the kind of conversation I am here for. Bring it to me early and we will figure out the best way to tell the story.
