6 Best Ways to Finance Your Seasonal Business

6 min read • Jun 15, 2021 • Jesse Sumrak

Financing a seasonal business can be tricky. You need up-front capital to prepare for the busy season, and then you need ongoing cash to keep up with mid-season expenses. Thanks to these challenges, it’s difficult for seasonal businesses to rely on sales alone to fund all of their costs.

Fortunately, financing can help. With the right seasonal loan, you can cover your bases and make the most of the busy season. Get ahead of the game now by forecasting your financial needs and applying for funds in advance. 

Remember, fast cash is usually expensive cash. If you can predict your needs ahead of time, you can secure much more affordable financing.

First, let’s cover a few ways you can use seasonal loans to fund your business. Then, we’ll share our 6 favorite financing methods for making it happen.

How to Use Seasonal Financing

Whether you’re preparing for opening day or keeping inventory on the shelves during peak season, seasonal financing can be a huge year-round help. Here are a few ways you can use a seasonal loan to give your business a financial advantage:

  • Hire Extra Help: Add additional headcount to your team to serve more buyers and provide top-notch customer service.
  • Stock Up on Inventory: Purchase sufficient inventory in the pre-season and during the busy season to keep your shelves full.
  • Purchase Equipment: Buy additional equipment or make necessary repairs to remove bottlenecks and maximize efficiency.
  • Launch Marketing Campaigns: Start generating awareness before and during peak season with targeted advertising campaigns.
  • Cover Cash Flow Gaps: Take care of emergencies quickly and stay on top of all your financial obligations.

6 Financing Methods for Seasonal Businesses

1. Short Term Loan

If time is of the essence, a short term loan can get you the quick cash you need. You can get a short term loan for as much as $500,000 with terms up to 3 years, helping you stretch out your monthly payments. Plus, these loans are quick. You could get the financing you need in as little as 24 hours.

You can use a short term loan to finance just about any business expense: payroll, equipment, marketing, inventory—you name it. If you need to purchase a lot of up-front inventory or buy an essential piece of equipment, a short term loan can help you do it in no time.

2. Business Line of Credit

A business line of credit is the go-anywhere, do-anything financing tool. Your lender will approve you for a certain credit amount, and you’ll be able to draw from that line as often as you’d like to. 

Draw what you need, pay it back, and then get access to the funds again. And the best part is that you only pay interest on the portion you borrow—not the entirety of your line of credit. This is what makes a business line of credit a flexible and affordable financing tool.

If you know you’ll need extra capital but you’re not sure how much, a business line of credit can help you save money. You won’t secure more than you need and have to pay off the unnecessary interest.

Use it if you need it, or keep it in your back pocket for an emergency. A business line of credit is a must-have financing tool for any company but especially for seasonal businesses.

3. Accounts Receivable Financing

Just because you’re making more sales doesn’t mean you necessarily have more money. If you have a long cash flow turnover rate, then you likely won’t see the income for quite a while, which isn’t very helpful if you need money ASAP.

Accounts receivable financing (also known as factoring) lets you sell your outstanding invoices for immediate cash. A factoring company will buy your IOUs and pay you up front for 80% to 95% of the value of your invoices. Then, they’ll chase down your customers for the remaining balance and take out their fees before sending you over the remainder.

Sometimes less money today is more valuable than more money tomorrow. If business is booming but your cash is tied up in accounts receivables, this can be a great way to get you the money you need to fund your busy season.

4. Merchant Cash Advance

A merchant cash advance (MCA) gives you a lump sum of cash in exchange for a percentage of your daily sales. Unlike a term loan, you’ll have flexible payments based on your revenue (not a fixed monthly payment)—that means you’ll have higher repayments during the busy season and lower payments during the off periods.

You can use your MCA cash to finance various business expenses. Qualifying is easy—you just need to prove how much money you make regularly. However, most lenders will look at your last 4–6 months of bank statements, which might not include your previous peak season. This could hurt how much you qualify for.

An MCA can get you cash quickly, but it’s not cheap. You should only turn to a merchant cash advance when you’ve exhausted your other options. 

5. Small Business Credit Card

You can use a small business credit card a lot like a line of credit. It’ll expand your working capital to cover day-to-day expenses like purchasing supplies, making quick repairs, or even paying the overtime crew.

Small business credit cards can have extensive lending limits, too—you could secure one with a credit line as large as $50,000. The only caveat is that you’ll want to spend responsibly so you can pay off the card in full every month. Don’t just focus on the minimum monthly payment. Credit cards can have higher APRs, and you don’t want to pay more interest than you need.

6. Equipment Financing

Equipment financing can help you purchase just about any business-related asset: forklifts, trucks, furniture, software, and more. Plus, you don’t need to provide any additional collateral since the equipment you’re financing will suffice.

An extra cash register or blender can help you process customers faster, helping you make more sales and capitalize on the peak season. More sales now is worth the monthly expense, especially since you’ll own the new piece of equipment moving forward and can sell it at a later point if necessary.

Capitalize on Peak Season

Despite the long days and busy hours, most small business owners anxiously await the peak season. With the right financing in place, you’ll be positioned to overcome challenges and make the most of every day.

Need help securing funding? Getting you money in the bank is what we do best. Start your 15-minute application to start exploring your seasonal financing options.

Jesse Sumrak

Jesse Sumrak is a Social Media Manager for SendGrid, a leading digital communication platform. He's created and managed content for startups, growth-stage companies, and publicly-traded businesses. Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. When he's not dabbling in digital marketing, you'll find him ultrarunning in the Rocky Mountains of Colorado. Jesse studied Public Relations at Brigham Young University.