The Best Types Of Loans & Financing For Your Seasonal Business Needs
Every business owner probably dreams of regular, stable, month-to-month cash flow, with spare cash on hand to cover any expenses that might arise. The reality for most businesses, of course, is that sales are often seasonal. One way to bridge the famines between the feasts is to use seasonal financing to normalize your cash flow.
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Use A Seasonal Business Loan To Get Financing When Your Business Needs It Most
Technically, there’s no financial product called a “seasonal business loan.” There are, however, a number of ways to finance your business’s short-term, cyclical needs. These include loans, lines of credit, and even business credit cards. What you’ll want to look for is money you can quickly access when you need it and then pay back as soon as you can to get it off your books.
6 Reasons You Might Need A Seasonal Business Loan
Before we get to the types of seasonal business loans you can tap to cover your seasonal shortfalls, let’s take a look at some of the reasons you might need a seasonal business loan.
1) Meeting Payroll
Labor is usually one of the biggest expenses for any business. While some businesses may be able to get away with having seasonal staff, that’s often not the best way to retain talented and reliable personnel. Even if you have seasonal staff, you may need to hire them in advance of your seasonal peak, before you have the revenue to cover salaries. A seasonal business loan can help you hire and retain talent.
2) Off-Season Repairs
Whether through planning or bad luck, sometimes repairs and maintenance need to happen when your company isn’t all that busy. Perhaps a key piece of equipment broke. Maybe you want to redo your storefront. In any case, you may need additional funds to cover the costs.
3) Buying Inventory
If your busy season is looming, and you sell a product rather than a service, you’ll probably need to stock up in advance. If you’re coming off a slower season, you may not have the funds available to cover the inventory you need. You don’t want to miss out on sales because you’re sold out.
Need to stoke the fire in preparation for your busy season? Want to try bringing in more business during the off-season? You may need to do some advertising. While you probably don’t want to go overboard, a well-placed campaign can make a big difference in your sales. If you need money to cover it, you may want to try a seasonal business loan.
5) Planning Ahead
Some types of seasonal funding can serve as an “insurance” policy of sorts. With a line of credit or a business credit card, you can have money at the ready for unanticipated expenses.
6) Normalizing Your Cashflow
Most of your month-to-month expenses probably don’t disappear when your revenue is low. Some businesses may find it useful to use a short-term financial product to keep all their expenses up to date.
Best Types Of Loans For Seasonal Business Needs
So you’ve determined that you need some kind of seasonal business loan. Now let’s look at the types of financial products and services that can help you meet your seasonal expenses.
If you’ve looked at any online lenders, there’s a pretty good chance you’ve seen an advertisement for a short-term loan. These loans are a little bit different than the typical term loan you might get from a bank. They’re designed to be quick, and that applies to everything from the application to the repayment process. Most short-term lenders can drop a healthy lump sum in your account within a few business days if you’re approved. Repayment usually begins immediately, with regular payments deducted automatically from your business account either each business day or weekly. The term length of a short-term loan is generally a year or less.
If you need a relatively large chunk of cash quickly and can handle the repayment schedule, short-term loans are a great way to get your hands on working capital.
Lines Of Credit
A line of credit is like a loan you may or may not use. Or you might only use part of it. If you successfully apply for a line of credit, your lender will extend you a certain amount of credit. This number is your credit limit. For as long as your line of credit is active, you can draw money from it so long as the total amount you’ve borrowed does not exceed your credit limit. In most cases, you’ll only pay interest on the amount of credit you’re using.
Lines of credit are great for seasonal businesses that want a kind of “rainy day fund” for unexpected expenses. Most lines of credit are revolving, meaning that as you pay them off, your credit becomes available to use again. If this sounds similar to a credit card, that’s because credit cards themselves are a form of revolving credit. That said, a non-credit card line of credit will often be better for making larger purchases that you can’t pay off within 20 days.
Business Credit Cards
And speaking of business credit cards, they are also a valuable way to bridge the gap between your boom months. Business credit cards are similar to personal credit cards, except they tend to have bigger reward programs. They also lack some of the legal safeguards associated with personal credit cards, so if you’re going to use them, make sure you don’t get in over your head.
When should you use them? Business credit cards have a narrow application, but within their niche, they can actually save you money. The key is to never carry a balance. By that, we mean you should pay your card off in full during the interest-free credit grace period offered by your issuer. You’ll collect points without accruing any interest! This makes business credit cards ideal for smaller, short-term expenses.
Equipment financing covers an enormous swath of products that includes both loans and leases used to acquire hard assets. While many of these are potentially useful, of particular interest to seasonal businesses may be the operating lease. If you only need a piece of equipment for part of the year, it may make more sense to rent it than to own it. Operating leases can be a great way to get your hands on up-to-date equipment when you need it, without being burdened by long-term upkeep and repair costs.
Where You Can Find Seasonal Business Loans
Ready to look for a seasonal business loan? When you have an idea of what type of product best fits your needs, you can check out one of our best-of guides to help you compare your options.