Loan approval will depend on repayment ability, a number which is ultimately derived from your sales.
A Strong Sales Focus Is the Best Way to Get Credit
Financing for startup businesses is difficult to obtain. It might actually be impossible for some small business owners who have never been in business before to obtain financing.
Without a record of success, lenders are unable to define the level of risk they face with a loan to a startup. They may offer a loan backed by sufficient collateral, but they will rarely make a loan based solely on an optimistic business plan developed by an unproven entrepreneur, or a brand new PAYDEX® score.
Loans are approved when the business is generating enough cash flow to make the loan payments. After an operating record is attained, lenders will consider funding expansion, provided the proposal will increase sales enough to cover the loan payments.
Cash flow, which is largely derived from sales, is almost always a critical factor of the loan approval process.
Sales Determine Profitability
No business can be profitable without sales, and given the competition for sales in any field, it is easy to understand why banks are reluctant to fund unproven businesses. While some business owners will always believe that they could be successful if they had access to credit, the truth is probably that sales will be the ultimate driver of success.
Increased sales will allow for more financing from vendors, which will allow you to generate even more sales, since inventory can be increased. Increased sales will also increase profits for most companies, and could even allow for growth with retained profits, rather than credit.
A single-minded focus on sales, almost ignoring credit applications except for trade financing, could be the best use of time for many small business owners. To generate ideas on how to increase sales, you should consider some strategies recommended by the nonprofit group SCORE.