Solving Seasonal Cash Flow

This time of year can be a peak period for many businesses, with schools out, the sun shining (maybe) and people in the holiday mood, the takings of many businesses will be higher now than the rest of the year.

Cash flow now can be at it’s best, so no need to worry right? Wrong.

For seasonal businesses there are 3 key things they should be doing to solve cash flow problems. The best time to raise finance is when you don’t need it, here the the 3 reasons why you should be doing things now.

1 – Bank Statements Are Great

Many commercial lenders will ask for bank statements. The reason they do this is to see how you run your bank account. The theory being that if you manage your bank account well then you should be able to manage your general business finances well.

The other reason is to see what you are paying out for, plus whether you have any spare cash. Lenders are looking for payments to creditors, especially those that are deemed ‘last case’ lenders as this indicates a desperation to borrow. Spare cash is about having something in reserve in case things go wrong.

At this time of year all these factors will be in your favour.

2 – Your P&L is Smiling

Print off your P&L as it will show some decent profits. Lenders will know this is due to seasonal peaks but it will also show that you are; A – thinking ahead, B – Being genuine that the need for cash flow finance is temporary because the trading now will be your repayment source in 11 months time.

Always apply for borrowing when your P&L is at it’s happiest, don’t leave it until you need to borrow to ask for money.

3 – You Don’t Need It

This point has been covered before but it is still relevant. Always ask for commercial borrowing when you least need it. Most overdrafts are agreed on a 12 month basis so getting something agreed now will see you through your low period.

Remember that few lenders want to lend to a borrower that really needs it. The less someone needs to borrow the more likely they are to repay you, at least that is the theory.

Think Ahead When Borrowing

The bottom line here is that many companies will be busy this time of year, many lenders will be quiet. It can be a great time to apply for finance even though you may have the least time available, think ahead as it can really help.

By Dave Farmer

Lime Consultancy are a business finance specialist based in Sussex. Working with companies across the UK to help them access commercial borrowing. For any questions about this post please add them above or contact us direct.