As a Small Business Owner – really as any Business Owner – you should have your holiday funding sorted out already. However, it’s not too late if you put it together now. Small-to-medium businesses often find themselves looking for last minute funding during the holiday season, and while last minute lending can provide a much needed cash infusion, they can be more expensive than financing that was initially planned and budgeted for. Still, it is a must-have for businesses needing to bulk up on products, supplies and marketing that is essential for the holidays.
Surprise! Additional Year-End Expenses for Small Businesses
Many of the loans taken out during the holiday season are taken out last minute because they were unexpected. There are many financial issues that can crop up during the holidays:
- Payroll & Holiday Bonus Expenses
Many business owners enjoy giving gifts to their employees during the holidays, but this can take a financial toll, especially if the business hasn’t budgeted appropriately.
- Year-End Expenses
The end of the year can bring many contracts to bear, some of which may need to be paid out immediately and finalized.
- Reduced Income
For companies outside of the retail and entertainment industries, the holidays can be slow. Business owners may not anticipate making significantly less income through the holiday season.
- Seasonal Business Trends
Even though some companies may be doing more business, they may be profiting less. This is because they may need to hire seasonal and temporary workers, invest in training, buy more supplies, and more.
- Supplies & Equipment
Sometimes the expenses are temporary. Those within a retail or merchandising space may find that they sell more product than ever, but this comes at a temporary cost of supplies, product, and equipment. A business owner may need to leverage financing to fulfill these orders.
Business owners may also find themselves financially strapped (personally) during the holiday season, which can make it more difficult for them to lend money to their own business. Together with the factors above, it creates a perfect storm.
The end of the year can bring many contracts to bear, some of which may need to be paid out immediately and finalized. A small business loan might be necessary to cover these year-end expenses.
Surviving the Holiday Season
Rather than having to apply for last minute financing, business owners should plan ahead. Last minute financing options generally include merchant cash advances and personally guaranteed loans, both of which can be expensive and lead to significant fees over time. By calculating necessary working capital ahead of time, a business owner can procure the best financing option for them well in advance. However, if you waited until the last minute and it is still necessary to drive sales in the holidays, the profit you make will likely make up for the additional loan costs.
Business owners should take a look at their prior year expenses for the holiday season, in addition to anticipating how seasonal business trends may impact their sales and revenue picture. In terms of personal finances, business owners should also be prepared to devote additional working hours during the holiday season and should be aware that they may not be able to rely upon company draws.
Need Start-up or Small Business Loans to Survive the Holidays or Prepare for 2021?
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