What do SmartBiz® bank partners look for when evaluating a loan application for an SBA or bank loan? One metric they’re interested in is your “Business Revenue Trend”.
What is Your Business Revenue Trend?
Simply put, the Business Revenue Trend is a percentage that reflects the revenue growth of your business over time and illustrates how your sales have increased, decreased or plateaued. This is considered a more valuable measure of financial health than just flat revenue numbers per year. Banks like to see a positive trend because it shows business growth and suggests that a business will continue growing with a loan they can repay.Did you know? Your business revenue trend is considered a more valuable measure of financial health than just flat revenue numbers per year. #smartbizloans Click To Tweet
Calculating Your Business Revenue Trend
You can calculate your Business Revenue Trend by looking at the average growth in revenues from your earliest tax return to your most recent tax return.
Why is this Number Important?
Understanding how fast a company is growing is a critical component considered by banks when reviewing an SBA loan application. Banks prefer to lend to growing businesses because they are less likely to default on a loan.
What Should Your Goal Be for your Business Revenue Trend?
Your goal is to demonstrate growth in your business revenues over time. This shows the bank that you’re an expanding business and will be able to cover loan payments.
How Can You Improve Your Business Revenue Trend Percentage?
Increasing your revenue can improve your revenue trend. Here are some suggested strategies:
- Increase the number of customers: In short, bring more business in the door. Even if transaction sizes stay the same, more customers = more revenue.
- Upsell: Also called an ‘Add-On Sale’, this is when you encourage your customer to purchase more of your goods or services. For example, if you own a beauty salon, suggest a manicure in addition to a hair cut. If you own a restaurant, upsell additional food purchases like appetizers or a dessert.
- Raise Prices: If your prices go up, you’ll collect more revenue from every purchase a customer makes – with the same amount of effort. If you’re feeling uneasy about this strategy, check out these suggestions from American Express: 12 Ways to Raise Prices Without Ticking Off Your Customers.
Your Business Revenue Trend is just one of 7 key criteria banks use to evaluate your business when you apply for a business loan. To learn more about the 7 criteria and help you increase your likelihood of approval when applying for low-cost funding, sign up for our new no-cost online educational tool, SmartBiz Advisor. * This tool helps you learn how banks typically evaluate your business and recommends ways to increase your likelihood of approval when applying for the low-cost SBA and bank funding you deserve. Just like a CFO in a large business, SmartBiz Advisor can help you learn how to build your lending profile by educating you about factors banks consider.
Not sure if you qualify for an SBA loan? Try the new SmartBiz Advisor™ online, educational tool to learn about how you can get your business SBA or bank loan ready before you apply – no cost involved. You can assess key criteria banks consider and where your business stands on each. Learn more about SmartBiz Advisor here.
* SmartBiz Advisor is an educational tool to help you learn about how lenders may view your business. As such, you should not rely on this as the primary source of your business or personal financial decisions SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law.