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30 Nov 2023 / Asset Finance

Navigating seasonal business challenges: The power of refinancing 

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In the ever-changing landscape of business, seasonal fluctuations can be a constant worry, especially for small to medium-sized businesses (SMEs). Cashflow, inventory management, staffing, and overall business stability are just a few of the potential issues that seasonality can propose to businesses. However, a strategic approach to these challenges can transform them into opportunities for growth and sustainability. One such strategy is refinancing.  

In this blog, we'll explore how refinancing can be a game-changer for businesses dealing with seasonality and tackle those concerns about going into the new year with a strained cashflow for the year ahead. 

Understanding the impact of seasonality 

Seasonality refers to changes in business activity throughout the year. These changes can be due to various factors like holidays, weather changes, or industry-specific cycles. For instance, retail businesses often experience a surge during the holiday season, while construction companies might see a decline in cold, winter months. 

The primary challenge of seasonality is managing the cash coming in and out of a business. During off-peak seasons, firms might struggle to cover fixed expenses due to reduced revenue. On the other hand, peak seasons might require additional capital for inventory or staffing. 

So, what can companies do to manage their cashflow during this period? 

The power of refinancing 

For businesses that have a large amount of their cash tied up in assets and equipment, Asset Refinancing can be a great tool for releasing essential working capital and keep their operations moving forwards.  

So, what is refinancing? 

Refinancing is a type of Asset Finance that allows a business to raise finance against an asset or piece of equipment that their business already possesses. Here, they can continue using the asset in normal business operations whilst still benefiting from an essential cash injection. 

The types of assets firms can use as security for asset refinancing include machinery, equipment, and vehicles. The amount a lender might offer depends on a few things – like, the type of asset, its condition, and age. 

There are a number of advantages to using asset refinancing to support seasonal highs and lows: 

  1. Improved cashflow – With access to working capital, businesses have peace of mind that they can cover operational costs during lean and busier periods.
  2. Investment in growth – During off-peak seasons, businesses can use this extra capital to invest in growth opportunities, like upgrading technology, marketing, training staff, or expanding product lines. This proactive approach can lead to increased revenue when the peak season returns.

  3. Modernising equipment and operations – For businesses that use Asset Finance for equipment, Refinancing can give more flexibility and freedom to upgrade to newer, more efficient or more technologically advanced equipment. 

  4. Adaptability to market changes –With more financial headroom, businesses can be prepared for changes in the economic landscape as well as the potential slow or peak in demand and operations in the winter months. 

  5. Key expenses are covered – Whether a business is halted by poor weather conditions or a seasonal lack of demand, key expenses such as wages, bills and invoices remain a key concern for businesses who worry how they will manage to maintain payments until business returns. Refinancing bridges the gap, providing additional support to ensure everyday expenditure is covered. 

  6. Can be more suitable than traditional lending routes – For businesses looking for faster access to cash, refinancing can be a great alternative to traditional lending routes and in some cases release more capital compared to, for example, a Bank overdraft. 

Seasonal challenges turn into opportunities for growth and stability 

Whether grappling with the challenges of seasonality or simply looking to secure additional capital, refinancing stands as a strategic ally in ensuring year-round stability and success for businesses. By improving cash flow and providing investment capital, refinancing can help businesses not only survive but thrive during fluctuating market conditions. With careful planning and strategic implementation, refinancing can turn seasonal challenges into opportunities for growth and stability. 

Are you looking to navigate your business through seasonal ups and downs? Contact Our Head of Vendor Sales, Matthew Graham, and his team today to explore your refinancing options and unlock the potential of your business in 2024.  

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