Financial advice for seasonal businesses

Taking out finance to bridge shortfalls in cashflow during off-peak trading periods can be costly and is generally only advisable as a last resort. Before seeking further financing, take all the measures you can to ensure you maximise the money coming in and minimise expenses.

The right funding options can help seasonal businesses manage their irregular cashflow and operate more efficiently.

These include:

• an overdraft facility - arrange this with your bank before you need it and agree on terms that suit your needs, eg the limit of your facility, a single fixed fee or interest only on what you use, a flexible period when the facility is available
• bank loan - aim for a loan that can be adjusted according to your seasonal sales to allow flexible repayments to match up with cashflow; ie larger repayments when trading is good
• asset finance - involves releasing cash tied up in physical assets of your business, such as equipment or vehicles, to improve cashflow - this facility type of finance can be tailored to the seasonality of a business to allow flexible repayments
• bad debt protection - is a type of insurance that guarantees 100 per cent payment on invoices from all credit approved customers - will usually help your invoice finance agreement - often involves risk assessment of new customers

For further information see business financing options - an overview.

Factoring and invoice discounting

Factoring and invoice discounting allow you to boost cashflow by raising finance against outstanding invoices. This may allow you to maintain a steady flow of income all year round. You will typically be able to borrow 80-85 per cent of the value of the invoice.

Whenever entering a contract with a factoring or invoice discounting company check the termination notice period.

See factoring and invoice discounting.