There are often a lot of expenses that come with running a business. Beyond the costs of expansion projects, additional equipment or adding to your fleet to help your business grow, most businesses experience peaks and troughs throughout the year inline with buying habits and the economy.
If your sales cycle is often dictated by the calendar, how you cope with the change of seasons is not just a matter of ensuring business growth – it’s also about business survival.
Seasonal business loans can be the saving grace for businesses facing the challenge of meeting day-to-day running costs during quieter seasons.
Here’s how they work.
What is a seasonal business loan?
Seasonal business loans, or short-term loans, meet the short-term needs of seasonal companies. A seasonal business loan can help you manage and project cash flow through high and low sales months. It allows you to cover costs during the quieter months, and repay the loan during your high demand period.
You can also use a short-term loan for unexpected expenses or to grow your seasonal business. Using a short-term loan means you don’t have to cut business expenses or dip into a tight budget, but also allows you to reach the next level of success for your business.
Seasonal business loans in action
Let’s say you own a roofing company. You are hired by a big client and need a lot of supplies to complete the job. But it’s the start of your busy season and you don’t yet have the cash flow to buy the necessary supplies from your small business vendor. Without the supplies, you cannot complete the job.
With a seasonal business loan, you can buy the supplies and complete the job. You can then pay the loan after the customer pays your invoice.
The one big thing you need to know about seasonal business loans – they’re difficult, but not impossible to get!
Getting financing for a small business, let alone a seasonal business, can be tough. Lenders might deny seasonal businesses of regular loans because they need to be paid in monthly repayments, an option that often doesn’t work for these business structures. Having to repay a fixed amount each month, no matter how much revenue your business makes, simply won’t work for seasonal businesses.
It can be difficult for seasonal businesses to land outside funding as well. Upon giving a small business due diligence, lenders often consider seasonal businesses riskier than companies that have a consistent cash flow. Some lenders might question if seasonal businesses can pay fixed payments during the off-season.
The secret to securing a seasonal business loan
If you need the financial boost to get you through a dip in cash flow and demand, or you are wanting to structure asset finance for seasonal payments, a finance broker can make a world of difference to finding the right loan, and the right arrangements to suit your business.