Prepare for warmer months now and your small business financing needs.
As the calendar turns its page to May…and beyond, people begin dreaming of summer
With spring now upon us, business owners are fine-tuning their plans for summer, a time of the year when small companies thrive. For landscapers, ice cream shops, restaurants located along the water, and beach-related retail shops, the off-season is history.
Small Business Financing Preparation
However, preparation for the busy season often involves investment in the firm. For landscapers, riding mowers and hedge clippers may need to be replaced. Ice cream stores will start restocking their inventory, and restaurants along the seashore will begin hiring and training staff. Owners of beach rental properties may have to make repairs to their shore homes, upgrade furniture, and purchase new linens and other decorative items.
These situations frequently require an injection of small business financing at a time when cash flow is poor. That’s when securing a small business loan is most critical. Fortunately, it is a good time to be a borrower. In fact, according to the most recent Biz2Credit Small Business Lending Index (January 2018 figures), bank lending to small companies is quite strong currently.
Big banks ($10 billion+ in assets) have been approving 25 percent of the loan applications they receive. While the success rate is only about one-in-four, the approval rate is actually a post-recession high. Meanwhile, small banks – which include regional and community banks – grant almost half (49.1 percent) of their funding requests, according to the Index. Credit unions, another traditional source of small business loans, are currently approving a little more than 40 percent of their loan applications.
Banks typically look for higher credit scores and two or three years’ worth of financial information in order to approve financing requests. Thus, they have stricter lending parameters than non-bank, alternative lenders, which can usually provide money quickly, albeit it a higher interest rates. Small business owners that need to be ready when the nice weather hits, may not have the time to wait for a traditional bank loan or an SBA loan, which can take weeks to process and be approved. In such cases, borrowing from an alternative lender might be the best course of action, despite the fact that they can charge interest rates in the 30 to 40 percent range.
The signs are good for summer businesses this year. Overall, the U.S. economy is performing well by many measures. The stock markets have hit historic highs during the past year, and unemployment remains low. Capital is flowing to small companies, and consumer confidence is strong. Additionally, although fuel prices are not at the price points where they were in 2016-17, the cost of gasoline is still relatively low, which bodes well for summer road trips or short jaunts to the local dessert place.
Meanwhile, until summer does indeed arrive, business owners should prepare:
Create Warm Weather Promotions
If you own a bar/restaurant with outdoor seating, begin planning to drive traffic to your establishment. While Friday and Saturday nights likely will have lines out the door, focus on ways to bring customers in during mid-week. Consider hosting weekly Ladies Night Out events featuring discounts and special offers. Look into having live music. High school and college musicians are always looking for gigs and don’t usually cost a lot of money. An added benefit is that their parents and friends will come in to see them play, and that fact alone may generate enough revenue to offset the added expense. Memorial Day, Father’s Day, the first day of summer, and the Fourth of July presents opportunities for patriotic-themed promotions. Bars can plan in July for National Pina Colada Day (July 10), National Daiquiri Day (July 19). National Tequila Day (July 24). Establishments that offer desserts should mark their calendars to take advantage of National Ice Cream Day on July 17 and National Waffle Day on August 24.
Partner with Community Groups
Smart business people look to building relationships with groups in the community. Hosting “give back” days on Monday and Tuesday nights, when business is often slow, can both help organizations in the local community and add new customers to your existing client base. Cause-marketing signals to the public that you are interested in more than just your own bottom line. The goodwill may have quick payback when some of those patrons return on non-promotional days.
Manage Cash Flow
Managing the finances of a seasonal business can be very challenging. The light is at the end of the tunnel for many companies that see their annual uptick in the summer. Securing financing now to get your company to Memorial Day, the “unofficial start of summer,” may be the best way to ensure a successful 2018. Then, when revenues begin flowing, be sure to save for the lean times that inevitably occur for seasonal businesses.