The holiday season is upon us. For many businesses the next few weeks will be the busiest of the year and it will be critical to make the most of it.
Past findings estimate that two out of three UK businesses are affected by seasonality. Yet more than a quarter of these fail to make any business plan to protect their bottom line during quieter times.
Couple this with most business in the UK being under capitalised and you have a perfect storm.
On the one hand these seasonal businesses generate a lot of cash in the weeks leading up to key holidays such as Christmas. But at the same time their need for funds entering and exiting these periods tend to be equally high. They still have expenses and running costs to pay. They also need to ensure that they have enough on hand to buy stock and hire extra staff to meet the increase in demand. And it doesn’t end there. On top of this they also need funds to settle invoices once the rush starts to taper off.
The good news is that today there are more financing options available than ever before. But knowing where to look can be difficult.
Which option is right for you to ensure that you can maximise seasonal success?
Banks and other traditional lenders will often direct small businesses towards invoice finance as an alternative to an overdraft. This is because the funds being lent are effectively secured against invoices that have been raised.
To release working capital, retailers and other businesses selling by credit card, make regular, small borrowings that are repaid by cash from future sales. This merchant cash advance can be a useful short-term funding solution.
P2P lending is an alternative to business finance from traditional lenders. It is a vehicle that serves both people wanting to invest small amounts of capital and businesses seeking to borrow.
Comes in a variety of shapes and forms. It allows businesses to get access to working capital by taking advantage of digital technology. In general, you can complete an application online and receive a response within the next few days. There are both secure and unsecure options on the market.
As the MD for Spotcap UK, a business that supports SME growth by offering alternative financing, I advise you to prepare as much as possible and make the most of resources offered by the government. However, should you end up having more success than anticipated and find yourself with increased capital needs as a result, look for a dynamic financing plan – one that offers flexibility as your needs and the market environment change.
And remember whether it’s invoice financing or online lending, do your research and find the deal that is right for you. The options available stretch far, far beyond the bank.
This post was also shared on BusinessZone, a community for growth-stage businesses and entrepreneurs on 16/12/16.
Originally published December 16 2016 , updated February 25 2020