Almost every business in general will essentially experience busy times and down times throughout the year. Also to handle such minor fluctuations, it’s critical for business owners to have a system in place for managing capital flow at the slower times.
Businesses that usually operate in direct connection with the calendar year or seasons will most likely experience fluctuations that are far more important than any other businesses.
For instance, this might also include businesses associated with summer or winter retail, festive holidays as well as the farmers who produce the bulk of their income at the time of harvest.
High production of the seasonal income might effectively balance out over the period of the whole year, however unfortunately for these businesses their outgoings always coincide with the incomings at other periods of the year. This usually creates an enormous capital flow issue for most managers and owners.
- They are required to keep paying the employees all year round.
- They necessarily schedule as well as pay for yearly maintenance during the off season.
- Stock requirements to be ordered along with paying for the busy period starts.
- Farmers are required to pay for planting along with watering crops and feeding livestock.
If it is a seasonal business owner or manager, one must know how to maintain the accurate flow of capital to see them through the lean times. Ensure to have a chat with the finance broker about the inexplicable options available to them.
In the meanwhile there are certain loan repayment options for seasonal businesses.
Short Term Business Loan
A Short Term Business Loan provides loan repayment options for seasonal businesses. As they do suffer slightly with increased interest rates than other loans, they also have far shorter periods of repayment. This is generally a quick and effective turnaround loan, providing some significant perks to most business owners.
- They have quick and easy application times.
- It pays out in just a few days from approval.
- They are a highly affordable solution as the terms of loan are short.
- Provides flexibility of repayment.
- Can also be a security free loan option for certain kinds of businesses.
Here’s an example of how a short term personal loan works for one seasonal business.
Short Term personal loan example: Gracy’s Festive Decorations
Gracy owns an immense warehouse retail store, customizing festive decorations, gifts along with the paraphernalia for Christmas, Halloween as well as Easter. The store is typically open from August to December and for each month over the Easter period almost every year.
At off-peak times, Carol configures the store for the next festive holiday. It involves paying staff to plan as well as to set up displays, ordering along with sourcing any new stock, filling the store to manage the coming demand, as well as to conduct routine maintenance on the store as well as safety checks.
CAPITAL FLOW SOLUTION
When Gracy closes post the Christmas season, she allows a Short-Term Personal Loan. This is an unsecured loan with a period of flexible schedule of repayment.
As for the flexibility of repayment, Gracy can continue to ingenious, pay staff, order stock, along with not worrying about how she will gradually pay for it all while the store is typically closed.
When the store is open for business, the outgoings reduce as well as her earnings go up. She can now dedicate more of her earnings to pay out the loan prior to the end of the season. Also, then the process starts again.
For a solution allowing Carol to evaluate growing her business, as it is because it is short term, she hasn’t had to anchorage any of her property to secure the loan. Gracy’s good credit history, along with innovative business revenue over a period during the busy season means the bank is able to provide her a flexible repayment plan.
Chattel Mortgage Loan
To have a seasonal business is purchasing equipment, a chattel mortgage provides repayment options of loan for seasonal businesses accessing repayments to be structured to suit a business’ payment cycle.
A chattel mortgage allows businesses to buy as well to own the equipment they require to set off their business. The ‘chattel’ offers the security for the loan as well as the business makes agreed repayments until the the term end of the loan. One can also prescribe to have a residual or balloon payment at the end of the loan period to lower the cost of regular repayments.
Chattel Mortgage Loan – Examples
- George has a small scaled tourism business providing minibus tours to interest areas within a few hours reach of Perth, WA. Even though it operates throughout the complete year, business is actually slow in winter as well as the flow of cash is an issue. George was able to structure a chattel mortgage for a novel minibus with repayments over a period of 9 months as per calendar year, with almost no repayments for the 3 winter months.
- Ana is a wise third generation wheat farmer, as well as she is also busy trialing alternative crops to assort her harvest. This has ensured that she has to wisely invest in supplementary crop equipment. She fails to have sufficient frequent income coming in to meet monthly repayments of a loan on top of her various commitments, nor the time to worry about different repayments of a loan. Thus, the chattel mortgage is wisely constructed ensuring to build an annual repayment in February almost every year to coincide with income of the harvest.
- Building contractor Tyson has finally ensured sufficient building contracts on his books for the upcoming years, which has needed him to easily and quickly put on numerous contractors along with purchasing to build the equipment. He was able to easily structure his loan for novel equipment with increased repayments for the starting two years of the term of finance to equally match his contract income, also to make equity into the novel equipment.
TO CONCLUDE
Seasonal businesses are not considerably unfortunate to meet failure, in spite of how it usually appears from the outside. The finance broker will make sure to be able to find a well-suited lender that comprehends the nature of seasonal flow of capital along with the arbitrarily specialized personality of business.