Seasonality in cashflow can make the traditional approach to finance solutions unsuitable, the good news is that finance solutions can be made flexible to meet seasonal business’ needs
Often prevalent across a large variety of businesses , a business often has identifiable peaks and troughs in their turnover every year which can be proven
Let’s start with examples of businesses who have seasonality within their cash flow and ways a finance solution can be shaped by a lender to counter cashflow concerns
- The restauranteur
A coastal restaurant, has higher visitor numbers during the summer months and during off-season their takings drop considerably
A typical loan or finance agreement offers equal instalments for twelve calendar months which are easy to manage in high season but difficult in the winter
Instead, the restauranteur could increase payments during summer months and lower payments during the winter
- The property developer
In the construction industry, the 2-week pause at Christmas and bad winter weather can add significant pressure to cashflow whilst income pauses, and fixed costs such as wages, rent and employers national insurance continue
The property developer could make reduced payments during December and January, and increase payments to the lender during high productivity periods
Planning
The power of structured payment solutions relies on proactive planning ahead of future peaks and troughs in your cashflow
Communication
The better a financial institution understand your business’ situation, the more intuitive a finance solution can be made to fit your needs
Speaking to a finance intermediary who understands the marketplace and which lenders should be spoken with is pivotal to enhance the successfulness of obtaining a flexible finance solution
Forecasting
A cashflow forecast is a useful tool to get a better view of your road ahead, demonstrate to a lender your cashflow needs, and why a structured payment profile is required
Risk
It is important to be clear that being flexible can increase risk for a lender. As in the scenarios mentioned, the lenders balance will not reduce as quickly versus a traditional solution where this reduces equally each month
If a lenders underwriter has demonstrable evidence that this solution is best fit to your needs, this will increase the likelihood of approval
Interest
Adapting to your seasonal cash flow could allow a business to opt for a shorter finance term, the shorter the term of a finance agreement, will generally lower the total amount of interest you will repay
Through our qualified experience and an established lending panel, we help businesses obtain the funding required to grow
Contact us for more information to discuss your unique business situation
