Are recent low sales keeping your business from getting a loan?
For many businesses, the low March through June 2020 sales months are keeping are keeping businesses from getting approved for loans.
FAQ Frequently asked questions on getting a business loan with low recent sales
What are slow sales considered?
When sales are less than normal for a specific time period. Lenders consider any reduction of sales of more than 25% to be a significant reduction.
How do lenders look at a major decline in sales?
Lenders want to know why were sales low and for how long. They also want to know when sales are expected to rise again and how much. Lenders also look at the percentage drop in sales. If the business can survive, pay all expenses and make a profit are then evaluated in the loan decision.
How can I get a business loan when we are operating at 50% capacity?
There are several other types of financing a business may still be able to get now even with a big drop in sales. Asset based financing is the most likely, including using receivables, equipment or real estate.
My business tax returns last year were good. Why did the lender still decline us for the recent drop in business sales?
The lender is looking closest at the condition of your business right now and in the future. Lenders see a recent big downturn without knowing when sales will go back to normal as very high risk.
Many businesses have had low or no sales in the last few months because of the Covid-19 lockdown. Their many challenges include not being able to get financing.
Save your time. Don’t spend weeks racking up hours and inquires applying with lenders and programs that are almost certain to decline your business. Apply with programs that will lend even with much less demand during the virus. Get funded now. Apply above.
What are examples of declines in demand?:
March, April & May were much slower sales because of covid-19.
The most recent (3) months sales are looked at. The total deposits per month are reviewed to determine trends. Questions by the lenders include:
Is there a downturn? If so, how much? What were the customer’s average daily balances? Were they overdrawn with NSF’s and overdrafts?
50% or 60% reduction in sales
Lenders look at how much of a reduction in business your business has had. How steep of a reduction, how quickly, how long and has the business started to recover? The main thing lenders will look at is the percentage sales drop. Any drop in sales over 25% is considered significant. Funding may still be possible with drops of 50% to 75%. If a business has had a major drop in sales and needs a larger business loan, then they can add real estate to back the funding and get a much higher loan loan.
Some segments of your business were strong while others had very low sales.
Example: A retail store’s overall sales in March, April & May were down 50%. In store customers dropped to almost 0 because of the lockdown. However, because their website offers shipping and delivery of products, online sales were up 75%.
How to get a small business loan in spite low recent sales?
– Make your case. Don’t just say business was bad. Say more.
Example: Explain why. You can say “We had a drop in business and purchases because of the virus. In spite of that, we are now open and sales are increasing”.
In the example above, provide the information when applying. Explain how it was not the fault of your business, and you still had sales that are now increasing, both positive current trends. This shows that your business overcame obstacles and is rebounding.
Have all the following questions already answered about the slowdown in business and provide them when you apply.
How bad has it been?
What is the situation now?
How has it affected your business?
What are you doing about it?
When do you expect sales in rebound and increase?
How can you show the business will survive?