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How to Overcome Seasonal Customer Cash Flow Gaps with Business Financing

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Cash flow is a never-ending problem in small businesses. Achieving consistent positive cash flow is an even bigger challenge if you make most of your sales during a single season. A U.S. bank study showed that 82% of businesses fail due to poor cash management—so if you have trouble putting money in the right places, you’re not alone.

Cash flow can slow to a trickle during slumps in industries like retail, construction, landscaping and hospitality. The result? Business owners scramble to meet expenses.

Strategic planning and saving helps, of course, but what if the cash you set aside isn’t enough? How can you be sure you always have enough funds to keep your business going until sales pick up again? Here’s what you need to know.

seasonal cash flow gaps

Anticipating Seasonal Business Cash Flow Gaps

Start by taking a look at past sales records and cash flow statements. If you don’t have a cash flow statement, now is a good time to make one

This gives you a window into your ongoing financial situation. It helps you see where your business’s money comes from, where it goes, and whether or not you’re bringing in more over time.

Seasonal sales trends offer more insights. 

You can’t always know when a lull will occur, but most seasonal businesses will have one or more predictable downward trends during the year. For example, construction companies do most of their business in the summer. Retail stores often see a huge increase in customer spending around the holidays.

As you review your financial documents, take note of:

  • The average length of slow periods
  • How long it takes most customers to pay invoices
  • Any significant gaps between when you owe money and when you get paid
  • Times of year when your expenses are highest 

Use this information to create an overview of a typical year. With this as a baseline, you can anticipate how much extra cash you’ll need to cover expenses when cash flow drops. 

Make a Cash Flow Plan for Slow Times

To have an accurate idea of future cash requirements, you need to create an expense forecast. This should include all known expenses, such as: 

  • Payroll
  • Taxes
  • Warehousing
  • Rent and utilities
  • License and permit fees
  • Business insurance
  • Ongoing marketing efforts
  • Equipment servicing and maintenance 

In addition to these fixed costs, you need to consider seasonal expenses. Ironically, it’s normal for seasonal businesses to spend a good deal of money right before sales pick up again. This is because it helps them to generate the highest revenue—even though it’s when they have the toughest time laying out cash.

What do these costs look like in an expense forecast? Depending on your industry, you may need to budget for: 

  • Purchasing inventory in anticipation of customer demand
  • Hiring employees to handle increased traffic or additional jobs
  • Repairing, cleaning, maintaining or upgrading tools and equipment
  • Developing and launching new marketing campaigns 

Again, going through financial statements can give you a clearer picture of how much you’ve spent in previous years and where the majority of the money went.

Look for patterns. Note where you allocated too much or too little cash. If you find cash flow is negative during slow seasons more often than not, you may benefit from business financing.

Maintain Working Capital with a Business Line of Credit

A line of credit provides reliable funding for seasonal gaps.

Unlike a loan, which gives you a finite amount of cash and locks you into a repayment schedule, a business credit line makes a given amount of money available as needed and only requires payments when a draw is made. Revolving credit lines replenish every time you make a payment, so that you always have credit available. 

How does this help your business during seasonal slumps?

Imagine you put aside money in anticipation of a slow period. You’re doing fine until a key piece of equipment breaks. Repair costs could easily wipe out a huge chunk of what you saved, leaving you with next to nothing for the rest of the season. If you use a line of credit to cover repairs instead, the cost is spread out across payments on the amount you draw.

To minimize the impact financing has on cash flow, look for a credit line with no inactivity fees and low or no draw fees. If you’d also prefer to avoid risking business or personal assets as collateral, an unsecured line is the best option.

More Tips for Managing Cash Flow

As useful as a line of credit may be, remember it should only function as a support system. To keep your business cash flow positive, you also need to: 

  • Categorize expenses to clarify where money goes
  • Stay on top of bookkeeping
  • Remove unnecessary costs
  • Be strategic about inventory management
  • Pay bills and invoices on time to avoid late fees 

Learning how to find operating cash flow – the cash left over from primary business activities after expenses are subtracted – can help you make better spending and saving decisions.

Get Financing to Boost Your Seasonal Business Revenue

If your business could benefit from a true revolving line of credit, get in touch with National Business Capital.

You may be eligible for financing to cover seasonal cash flow gaps with no restrictions on how often you draw on the line. To qualify, your business must be established for two years with $120K in annual sales. There are programs available for all credit profiles!

National’s business line of credit doesn’t require collateral or a minimum FICO score, making it accessible to companies across the financial spectrum. All you need is three months of operational history and $120,000 or more in annual sales to get funding. 

Complete the 60-second application to get started and learn your options right away!

Last Updated on March 20, 2020

National Business Capital is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

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About the Author, Joe Camberato

Joseph Camberato, CEO of National Business Capital, developed a passion for business at a young age. Joe started his company in 2007 in his spare bedroom and has grown to secure over $1 Billion dollars in financing for small business owners nationwide. National’s team has an amazing culture and has been name the #1 Top Workplace on Long Island 3 years in a row and counting. Joe is a trusted financial expert who’s published more than 2,000 articles in the last 3 years. His articles have generated over 5 million page views and has been featured on blogs such as Google News, Yahoo, CNBC, Forbes Magazine, etc. His passion has also inspired him to build the "GrowByJoe” YouTube channel where he shares his insights into small business trends and tips for growth. Joe also holds a seat on Forbes Finance Council and is an active member of the Young Presidents' Organization (YPO), a global leadership community.





Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.