While some business owners see steady income year-round, others have seasonal businesses that may thrive for a few months and then slow to a near halt the rest of the year. One example is a summer business, like a company that offers beach toy rentals. Business may boom during the summer months, but what happens to your revenue (and ability to pay your bills) the rest of the year?

Fortunately, your finances don’t have to suffer, since there are seasonal business financing options to consider.

What is a Seasonal Business Loan?

To keep cash flow steady, entrepreneurs like you may need to take out one or more small business loans, which, for this purpose, could be considered seasonal business loans. These financing options can see you through slow periods to ensure you always have enough cash to pay your business expenses throughout the year.

How Loans Can Help Seasonal Businesses

Your business may operate all year, though some seasons are more profitable than others. A seasonal business loan can help you pay your staff even during the slow months or stock up on inventory before you have cash on hand. A loan can help you cover business expenses you incur to get ready for the season as well.

If you have the chance to, for example, buy a competing business, a loan can provide the capital you need to take advantage of this opportunity.

Best Seasonal Business Loans

Your seasonal loan options are many, and there are lenders who cater to every credit profile. Here are a few to consider.

SBA Loans

Guaranteed by the Small Business Administration, SBA loans are offered through banks, credit unions, and online lenders. They tend to offer lower interest rates and have long repayment periods. 

Traditional Loans

Though these may be more difficult to get because of stringent credit score requirements, loans offered by banks and online lenders can offer some of the lowest interest rates and favorable terms as well.

Both Newtek and OnDeck offer long-term loans with favorable terms.

Credit Line

Another option, especially if you don’t need all your cash at once, is a business line of credit. Get approved for a certain amount of money that you can borrow and repay at any time. It’s the ideal solution for a company whose cash flow is unsteady.

OnDeck and FundBox are examples of companies that offer lines of credit.

Equipment Financing

If you’re specifically looking to purchase equipment for your seasonal business, equipment financing could provide the solution you seek. You use the equipment you’re purchasing, whether that’s a company vehicle, machinery, or computers, as the collateral for the loan.

Lendspark offers equipment financing.

Short-Term Loans

Another option for small business owners who don’t have great credit is the short-term loan. These loans typically have to be repaid within one to three years, and may have higher interest.

Kapitus and Rapid Finance offer short-term financing options.

Merchant Cash Advance

If your credit’s not great but you need cash quickly, consider a merchant cash advance. Rather than a loan, it’s an advance on future sales.

Credibly offers cash advances with competitive interest rates.

Invoice Factoring

If you send invoices to clients, you can use factoring to get an advance on invoices.

Business Credit Cards

Another option for seasonal financing includes business credit cards. You can use them to make purchases for your business as needed. Keep in mind that they carry high interest rates, so you’ll want to pay off your balance quickly.

Ways to Use Your Seasonal Business Loan

So what can you use seasonal financing for? Often, small business owners have unexpected expenses, and these can come whether you’re bringing in revenue or not. A loan can help cover these unexpected expenses, such as needing to repair a machine or covering an increase in employee health insurance, even during downtime.

You may also have high costs to ramp up for the busy season, and if you don’t have cash on hand, it can be difficult to purchase inventory or hire staff. But that’s exactly what these financing options can help with. You can also use the funds to market your business, purchase ads, or invest in software that can help you grow.

How to Get a Seasonal Business Loan

Requirements for loan applications may differ from banks to online lenders. Some may require you to have high business or personal credit scores, while others may look at other factors, such as your annual revenues. Some may have complex application processes, while others require only a few details about you and your business.

If you don’t yet have business credit, learn how to establish business credit so that you qualify for the very best rates.

Review requirements for the loan you want to apply for and make sure you qualify and that you have all the necessary documentation. Check your credit scores before so you know where you stand.

When to Apply for a Seasonal Business Loan

So when’s the best time to apply for your loan? Don’t wait ‘til your slow season to do so, since your revenues may be lower and you might not qualify for the loan you want at the best rates. Instead, apply for your loan when your business is thriving, even if you don’t need the money at the moment, since you’ll be the most appealing to lenders then.

Things to Consider when Choosing a Seasonal Business Loan

The first thing to consider when applying for financing is how you will use the loan. There is a cost to loans, particularly if you have to get a short-term loan with higher interest rates because you don’t qualify for other options. Knowing what you plan to spend the loan on will ensure it’s a good use of funds.

Also, make a plan for repayment. If you take out too big a loan, you may struggle to make monthly payments and could risk defaulting on your loan if you’re unable to get back on track. Build your loan payments into your budget, particularly for the off-season since it will be more challenging to make those payments than it will be during the peak season.

Spending a few hours researching different financing options with different lenders could save you hundreds of dollars, if not thousands, so it’s worth that effort to do so.

If you aren’t finding loan options with low interest rates, consider waiting until you improve your credit. Paying bills on time, reducing existing debt, and reviewing your credit report regularly for discrepancies are a few ways you can improve your credit scores.

Seasonal business owners need access to working capital, even when business is slow. A seasonal business loan could be the stopgap you need to make it through slow periods.