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Financing Considerations and Options: Seasonal Businesses

By The Eastern Bank Commercial Banking Team | Updated, May 12, 2024
Two men dressed in red flannel shirts stand in the wheat field of their farm and review financials on a tablet

Seasonal businesses require a unique set of financing considerations.

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Businesses of all sizes and across a broad range of industries can experience seasonal events that impact their cash flow. Regardless of the time of year, it is important to ground your business in a financing plan that supports your specific cash flow demands. By working with experienced lenders, you can leverage solutions that are tailored to your business.

Through banking solutions such as revolving lines of credit and asset-based lending, seasonal businesses can create a steady flow of capital throughout the year to help build their businesses for the future. Financing options that support flexible capital structures can be advantageous in several ways. They are also an opportunity to prepare for long-term financing goals such as acquisitions, and build financial sustainability and resilience for the inevitable period of economic volatility.

Principles of a Seasonal Business

Seasonal businesses tend to be those that experience a peak to trough in sales in a very short period of time. They are found in most sectors, including retail, consumer products, recreation and tourism, distributorships and manufacturing. For seasonal businesses, it is most important to properly manage liquidity during the anticipated quiet season when the business may generate losses and to balance out the remainder of the year when revenues and profits are maximized.

To balance the seasonal versus non-seasonal periods, building up inventory months in advance during a quiet season can be necessary to stay ahead of the busy sales season. Therefore, access to sufficient and sustainable capital is critical to be prepared for the next sales cycle.

Supporting Seasonal Businesses: Eastern Bank’s Approach

At Eastern Bank, we have found it valuable to have a clear understanding of timing needs from our customers. We have vast experience with learning the ups and downs of seasonal businesses across different industries, which allows us to develop customized solutions that factor in cash flow expectations during the quiet season.

Further, our team of lenders has an extensive understanding of credit. We pride ourselves on taking our strong credit acumen and applying that to exactly what customers want to accomplish. With this mindset, we bring more than just an idea to the table. We are able to execute on a strategy to build sustainability for your business well into the future.

“We’re not solving for one solution. We evolve our relationships with customers and understand what the next iteration of a business will be so we can pivot along with them,” said Eastern Commercial Banking Lender Tyler Dufour. “We also pride ourselves on transparency and having an authentic relationship. The team that you meet as you’re beginning to explore financing options with Eastern Bank is the team that you will work with once you are onboarded as a customer.”

Financing Options Fit for Seasonal Businesses

As financing options are considered, there are a few solutions that are most fitting for seasonal businesses and may include:

  • Revolving Lines of Credit: Business owners are given a line of credit that they can borrow up to a certain, set limit. The main difference is, as you pay down the credit borrowed, it allows you to borrow and repay depending on working capital need.

    For example, companies can use a revolving line of credit that grows alongside its working capital needs. “We can be flexible by adding various cash management features, such as a cash sweep to a line of credit function, through Eastern Treasury, that allow businesses to manage cash. These products give businesses the confidence to automatically pay down a line of credit and easily draw in funds or accounts to make payments as needed,” said Eastern Commercial Banking Lender Matthew Hunt.
  • Asset-Based Lending: Asset-Based Lending (ABL) is a variation of a revolving line of credit which maximizes a borrower’s ability to leverage its assets. Traditionally, when a lender underwrites a loan, they evaluate the profitability and cash flow of a business whereas ABL lenders prioritize the collateral position of a business in credit decisions. With ABL, loan advances are primarily made against accounts receivable and inventory values. In certain instances, less liquid assets will be evaluated such as equipment, real estate and intellectual property. Given the focus on collateral security, there is less of a focus on profitability and leverage metrics. “For owners and financial executives who are pursuing working capital financing, Asset-Based Lending is an excellent solution,” said Eastern ABL Lender Dan Bolger. “Particularly if the business is in growth mode, has a leveraged balance sheet, or has a seasonal component to it.”

Finding Support for Your Seasonal Business

Evaluating different commercial lending solutions can initially feel overwhelming. The good news is, Eastern Bank has a team of experienced lenders who understand business and experience your marketplace every day, which can give you a powerful advantage. A lender will work hand in hand with you throughout the entire experience to recommend a financing solution that is most aligned to your business needs.

Learn how Eastern Bank can support your seasonal business needs.

The opinions expressed herein are those of the authors and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice. These views and opinions should not be construed as any specific recommendation. This material is for your private information and we are not soliciting any action based on it. The information in this content has been obtained from sources believed to be reliable but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information.

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