Business loan when sales are down: what lenders will look at

Can I get a business loan when my sales are down?

Yes, in many cases. What changes is the shape of the loan, not whether the conversation is possible. A lender looks at what the business is earning now, so a fall in sales usually means a smaller amount or a different structure than you’d have been offered a year ago.

Here’s the 1-2-3 this guide follows:

1. Work out why sales fell. One-off, seasonal or lasting?
2. Show the trend fairly. Three months and twelve months, side by side, with a short explanation.
3. Size the facility to the lower number. Not last year’s best month.

1. Why did sales fall? (Lenders will ask)

The reason changes how a lender reads the same dip. Sort yours into one of three buckets.

Cause	Examples	How it tends to read
One-off	A big client paused, a flood or closure, a supply hiccup	Often manageable if the recovery is visible in recent weeks
Seasonal	Slow winter, post-holiday trough, wet season	Normal if last year’s statements show the same pattern
Lasting	Lost a major customer for good, new competitor, market shift	Needs a plan; the lender will size to the new level

Be honest with yourself here. A lasting change isn’t a dead end, but borrowing on the old turnover is the classic mistake: the repayment is sized to money that isn’t coming in any more.

Business Queensland’s page on surviving a downturn lists practical ways to ease cash flow: offering flexible payment terms or deposits to customers, holding off on new equipment, renegotiating with suppliers and trimming holding costs. Doing a couple of these before you apply also helps your statements.

2. How do lenders read a drop in deposits?

Lenders go to your bank statements first. Our guide on what lenders read in your bank statements covers the basics; here’s the falling-sales version.

They compare windows. The most recent three months of deposits against the average of the previous twelve. A drop of a few per cent is noise. A sustained slide stands out.

They check the commitments against the new number. Rent, wages, existing loans and ATO instalments don’t shrink just because takings did. The question becomes: after those, is there room for another repayment?

They look at conduct. Overdrawn days, dishonours and a rise in short-term loan debits are the signs of a cash squeeze. If they appear, explain them.

They look for direction. A dip followed by two steadier months reads very differently from a dip still sliding.

Illustrative example only. A small retailer’s deposits over the past twelve months average about the same each month, but the last three months sit well below that. The owner’s note says a large contract customer moved supply in-house in July, that two replacement accounts started in September, and that October takings are back near the average. The lender sees the cause, the fix and the early evidence, and can size a facility to the recent months rather than guess.

What to put in your cover note

Keep it to five lines:

• What happened and when
• Whether it’s one-off, seasonal or lasting
• What you’ve already done (costs trimmed, new customers, changed terms)
• What the last four to six weeks look like
• What the money is for and how the lower turnover covers repayments

The lender documents list on our business loan documents page shows what else to have ready. business.gov.au’s loan guide also lists the financial reports lenders commonly ask for, such as your cash flow statements.

If you’d like a second pair of eyes on how your numbers look, you can start a 60-second enquiry without it touching your credit file.

3. How much should I borrow when sales are down?

Size to the lower number. A simple way to do it:

1. Take your average monthly deposits over the last three months.
2. Subtract your fixed monthly costs (rent, wages, existing repayments, tax set-asides).
3. Ask whether the remainder could comfortably carry the new repayment even if sales dip a bit further.

If the answer is “only just”, borrow less, borrow for a shorter, clearer purpose, or look at a structure with more flexibility. Our page on how much your business can borrow explains how lenders think about size, and business loan eligibility covers the other checks.

Which facility suits a dip?

• A cash flow or working capital loan suits a bridge to an expected recovery: new stock, a payroll gap, a delayed customer. See working capital loans and cash flow loans.
• A line of credit suits an uncertain dip, because you pay on what you use. See the business line of credit page.
• Property security can widen the options when turnover alone is thin. Property-secured lending runs from $20,000 to $5,000,000, and the property and exit plan carry more weight than recent sales. Bad credit and tax debt are considered case by case.
• Seasonal funding suits a predictable trough. Our seasonal cash flow gaps page shows how to present twelve months so the cycle is obvious.

What mistakes make a dip look worse?

• Applying after a string of overdrawn days. If you can, steady the account for a few weeks first.
• Stacking short-term debts to cover the gap. Several frequent debits shrink what’s left for any new repayment. Consolidating them can help, so ask about it.
• Sending only the best months. Lenders see the whole account anyway; leaving out the weak months costs trust.
• Borrowing to cover costs you could cut. Money used to fund a lasting shortfall just delays the problem.
• Waiting until you’re behind. The Business Queensland guidance is blunt: “Contact your bank or financial institution early if you are having difficulty repaying loans.” Earlier conversations leave more choices.

What if the squeeze is already serious?

Borrowing isn’t always the first answer. If you’re behind on payments, talk to your current lender and your accountant first. The Small Business Debt Helpline is a free, independent and confidential service for owners in financial difficulty, on 1800 413 828, and the Australian Small Business and Family Enterprise Ombudsman has financial wellbeing resources. Using them doesn’t rule out finance later.

What can you do in the next 30 days to look stronger?

You can’t change the past months, but you can change what the lender sees next.

• Week 1: download twelve months of statements and write the cover note. Flag anything unusual beside the figure it explains.
• Week 2: chase overdue invoices and offer a deposit or staged payment on new work. Cash arriving sooner shows up as steadier deposits.
• Week 3: cut or pause costs that don’t earn money, and move direct debits so they land after customers pay rather than before.
• Week 4: re-run your three-month average and your repayment test. If the picture has improved, say so in your note; if it hasn’t, you’ll know to borrow less.

Small moves matter because lenders weigh recent months most heavily. A business that has visibly responded to a dip often reads better than one that simply waited.

Two habits are worth keeping once things recover. First, keep a rolling thirteen-week cash forecast, even a rough one in a spreadsheet, so the next dip shows up in your own numbers before it shows up in a lender’s. Second, tell your accountant when sales move, not at year end. They can flag whether the change affects your tax instalments or your BAS, which keeps surprises out of the account lenders are reading.

A quick checklist before you apply

• Twelve months of statements downloaded, with the reason for the dip written down
• Three-month and twelve-month average deposits worked out
• Fixed monthly costs listed, including existing loans
• A note on the last four to six weeks
• A repayment you’ve tested against the lower turnover
• Your accountant’s view on timing

When sales dip, a clear picture helps

A slow few months doesn’t mean the door is shut. It means the right amount and structure matter more than usual, and that the story behind the numbers deserves to be heard.

If you’d like to know where you stand, we’d be glad to look at it. Asking takes about 60 seconds, and there’s no credit check when you enquire, so your credit file stays as it is. We don’t send your details to a pile of lenders; a real person reads your situation and calls you to talk it through. Please fill the form in accurately, including your recent turnover and any existing debts, so we can point you to the right option the first time.

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