Seasonal Business Line of Credit

While many businesses operate year-round some only do business based on a specific season. A seasonal business is a term that refers to the fluctuations in a business that is based on the changes in the season. Some examples include owners of a lawn care service, snow removal service, or vacation cottage. Some businesses may close down entirely during the off-season and only manage the basic services to run the company.

If you operate this type of business, financing can be a challenge because some lenders will not grant funds to businesses that are seasonal. Banks consider seasonal businesses a high risk and they will often deny credit simply because you operate a seasonal business. A seasonal business line of credit is a line of credit that is specifically designed to cater to seasonal businesses. A lender offering this type of credit line understands the risk involved but also realizes the fluctuation associated with a seasonal business. Lenders offering a short-term seasonal business line of credit can provide your business with the financing it needs to operate in the upcoming season. For example, a landscaping company needs to stock its inventory by purchasing trees, shrubs, and plants for the upcoming spring and summer season.

With a short-term line of credit it can purchase the inventory it needs. As the business sells its inventory during the season, the business will have the cash flow needed to repay the advance against the line of credit. In a nutshell, your business is using the inventory purchased from the line of credit to pay for itself as well as generate a profit for the business. Since this is a short-term payback your business also avoids accumulating long-term debt and avoiding the costly interest payments over time. A seasonal line of credit can be secured or unsecured depending on the lender’s requirements.

While most business owners prefer an unsecured line of credit, banks tend to prefer some form of collateral to secure the line. Where loans can be secured by the assets they are used to purchase, a seasonal line of credit acts like a large credit card with no limitations as to what the funds can be used for. However, unlike a credit card a seasonal line of credit must be paid back in a much shorter time period usually 6 to 12 months.

Before you apply for a seasonal line of credit do your homework and research all the types that are available. Whether you have bad credit, a seasonal business, collateral, or strong financials, there may be a specific type of credit line that is better suited to fit your needs and that of your business.

SBA Loans

SBA loans - 7A government small business loans

SBA loans or government small business loans offer a wide variety of loan guarantee programs to fund small businesses that can't otherwise qualify for loans on reasonable terms.

Commercial lenders make the loans and the SBA guarantees them because the SBA has no funds for direct lending or grants.

SBA loans (government small business loans) have two important points:

1) There is no limit on the amount of capital that can be requested.

2) SBA loans 7(a) have a maximum maturity term typically of 25 years.

To qualify, you should meet these criteria: You must have a stake in the business. The theory is if you have put your own money into your venture, then you are much more likely to push harder for the success of your business.

You should have a strong business plan showing the detailed plans on how your business can make money. How will you be able to repay the loan and does your business earn enough to cover the monthly payments.

You need a good personal credit rating. The borrower's track record in paying their bills will form an important component in the loan application process.

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