There is no such thing as a generic small business. Even in the same sector, two companies can operate completely differently – and the differences across sectors can be huge. So the best time to seek a business loan could depend on a number of factors, with the conditions in your industry being among the most important.
In general, the summer is the busiest time for construction projects, simply due to the constraints imposed by winter weather. Generally, business ramps up during the spring, peaks during the hottest and driest months, and then tails off when autumn gales roll in. This means you will take on most of your new projects in the spring, scheduling them for slightly later in the year – so this is when you will need to invest in new people, equipment and stock. This is therefore the best time to seek construction finance, although you may also need to borrow to stimulate a sluggish cash flow during the lean winter months.
For most doctors and dentists, August is a particularly busy month, as patients seek treatment before heading off on holiday and parents get their kids checked out before the new school year begins. This could mean hiring additional administrative staff or buying extra consumables to meet all these new patients’ needs. The best time to seek additional working capital is therefore in the late spring or early summer.
It will come as no surprise to learn that retailers are busiest in November and December (when Christmas presents are being bought) and January (when sales are in full swing). In general, they will need to borrow in the autumn to finance extra staff, with the huge spike in sales comfortably repaying the loan and any interest.
4 Financial services
For accountants, bookkeepers and other financial professionals, the two or three months leading up to the submission of tax returns (due in January in the UK and April in the USA) are the busiest. 60-hour weeks are far from uncommon, and it may be necessary to borrow to pay all that overtime until customers settle their bills. An alternative could be invoice factoring or discounting, which allows you to borrow against the value of your invoices as soon as you issue them.
Every restaurant owner will tell you that business peaks during December, when office parties are taking place, and dips in January, when everybody has blown their spare cash on Christmas presents. The summer months can also present a slight lull, as lots of customers are away on holiday. A working capital loan in late autumn can both pay for seasonal staff and tide your business over during the January lull or shutdown.
In contrast, hotels, resorts and bed and breakfasts experience peak demand in the summer (unless, of course, they are based in a winter sports resort). In general, the time to start the search for a loan is a month or two before the peak season kicks in.
7 Recreation and entertainment
Peaks and troughs for these types of businesses can vary significantly, and the challenges faced by a water park will be quite different from those of a ski resort. Broadly speaking, finance will be most important to tide you through the off-season, when customers are scarce but overheads still need to be paid. Apply straight after the busy season subsides, and when you still have cash on hand, and you will be ready to bridge the lull.
Many of us make getting fit a new year’s resolution, so gyms are generally heaving in January. However, the new customers quickly thin out as people lose motivation and find working out harder work than they anticipated. Start your loan search in November or December and you will be able to finance the extra equipment, resources and people needed to deal with these new – if, very likely, temporary – customers.