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Updated: August 31st, 2023
A business line of credit is arguably the most flexible financing you can find. It’s revolving, and you can use it to cover just about any business need. There’s a case to be made for why every business should keep a line of credit in their back pocket—but especially seasonal businesses.
For those working in seasonal businesses, periods of accelerated cash flow are to be expected. Sales can skyrocket, but expenses will often soar at a similar rate to keep up with demand. However, sales aren’t the same thing as money in the bank, and it’s not uncommon for many businesses to run into cash flow issues during peak season.
That’s where a business line of credit comes in handy to help finance your seasonal costs.
Quick, reliable, and affordable, a business line of credit is a dependable and efficient way to make the most of the busy season without letting cash (or lack thereof) slow you down. If you own a seasonal business, it’s a must-have financing tool. Let’s find out how it works, and the different ways you can use it to cover your seasonal expenses.
Business lines of credit typically operate within a standard framework:
First, you’ll apply for a business line of credit from a bank or alternative lender, and they’ll then approve you for a certain credit amount (similar to a credit card cap). Then, you pay off the portion that you just used to regain access to the credit. It’s that easy.
Additionally, it’s worth mentioning that you’ll only have to pay interest on the portion you used, rather than the entirety of your credit limit, making it a more affordable financing option—especially if you pay off your balance in full. Because it’s revolving, you won’t have to waste time reapplying for business loans and waiting on funding.
The beauty of a business line of credit is that it’s up to you how to spend your funds across your various business expenses. Use it to cover regular gaps in your cash flow, or you can keep it in your pocket for a rainy day—it’s your call.
With your business line of credit in place, you’re ready to take advantage of its speed, reliability, and flexibility today! Its versatility makes it a must-have tool for seasonal businesses, and can be a game-changer for companies in need of immediate financial support.
Below, we’ve outlined a few of the most common (and helpful) ways you can use a business line of credit to cover seasonal costs.
As the adage goes, it takes money to make money. If you don’t have products to sell or services to provide, you can’t make sales. A business line of credit can help you stay stocked up throughout the stages of your seasonal operations:
It’s also wise to double-check your cash flow forecasts to get an accurate estimate of what demand will look like. It’s quicker (and more affordable) to purchase inventory in advance. Rushing suppliers and paying expedited fees during the mid-season madness is liable to cost you more than is strictly necessary.
You may need extra temporary staff to help you through the busy season, and you might have to pay them before you see the actual fruit of your labors. A business line of credit is a great way to finance hiring extra seasonal help or even cover payroll if your current employees need to work some overtime.
Bringing on additional employees mid-season can help you serve more customers and provide better customer experiences. You’ll have the capacity to ship faster, turn down less work, and address customer issues more efficiently.
Consider the ways additional employees could help your business: if you need to process more returns or address more customer support issues, consider hiring and training a temporary call center. Or, if customer lines are slowing down sales, adding a second cashier or someone to help with bagging can expedite things considerably.
Of course, a larger headcount isn’t always the solution—sometimes, you need more machinery and equipment.
If you run a construction or manufacturing business, you can use a business line of credit to lease or purchase additional equipment to get you through the busy season. Even retail businesses can rent extra registers or temporarily upgrade their POS systems to process additional customer demand.
Look at your business processes to find the bottlenecks. Are they with your staff or with your available resources? Leasing equipment can help you process sales faster, allowing you to serve more customers and grow your business during the peak season.
The best time to boost your marketing is when business is booming. Don’t wait until the off-season to try and incentivize customers to come back—strike while the iron’s hot during the peak season to attract, win, and retain as many customers as you can.
It might seem like overload, but it’s much easier (and cheaper) to entice an existing customer to return than it is to earn a brand-new customer. Invest in digital and outdoor advertising to build awareness and drives sales.
Your business line of credit could also finance ongoing marketing tactics or help you launch seasonal campaigns. Look at your analytics to see where the majority of your referrals tend to come from during the busy season, and then pour additional budget into those channels to keep the customer funnel flowing.
In a perfect world, the busy season is not the time to have a financial meltdown – but surprises happen sometimes. Sure, you can often sort out a financial problem later, but you don’t want anything to slow down your operations and make you miss out on prime opportunities. This is where a business line of credit can be a huge asset.
Here are a few ways you can use a business line of credit to cover surprise gaps in your cash flow:
Ultimately, business lines of credit are versatile, reliable and speedy solutions to a number of seasonal business concerns. Start your application now and see where a business line of credit can take your company!
Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.