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For many retailers, the busiest time of the year is the holiday season. Busy periods are all about preparation. The more time you spend preparing for a surge in demand and the resulting curve balls, the higher the likelihood of a strong performance. This is why some of the most successful retailers begin preparing for the holidays at least four to five months in advance. There’s a good chance that, after examining its current financial health, a smaller retailers will realize that the most efficient way to obtain the resources required for achieving its goals is a working capital loan.
Of all the different small business loans, working capital loans are arguably the best choice for busy periods and overcoming the rough patch that often proceeds them. Here are a few ways working capital loans can help your retail store get ready for the holiday season and take a lot of stress off the business owner.
1. Striking the best deals with suppliers
One unique and extremely advantageous feature of working capital loans is that they can be accessed when business is slow. Busy seasons typically follow slow seasons. During this time, it’s not uncommon for a smaller retailer to barely have enough money to pay monthly expenses, let alone take measures to ensure the next season will be a success. But if you work with a company like United Capital Source, you may be able to qualify for a borrowing amount that can handle both functions. In other words, you could pay bills and payroll while making a series of investments before they become too expensive.
Vendors typically offer steep discounts for bulk orders during slow periods. They will appreciate your desire to strike a deal before the chaos ensues, largely because it makes it easier for them to estimate the quantities they will need by the time the holidays roll around. And the less you pay for inventory, the lower prices you’ll be able to offer. Certain types of working capital loans, like a merchant cash advance, give you the ability to order inventory without having to pay off the majority of the debt until sales volume increases. With a merchant cash advance, the amount you receive is based on debit and credit transactions. Business lenders therefore recommend looking at sales data from the previous holiday season so you can order the right amount of inventory.
2. Saving money by not having to spend your own
Business owners tend to forget that a central purpose of small business loans is to help you save money. A business cannot grow if it is unable to gradually put more and more money away. Saving money can be difficult, however, due to a variety of uncontrollable circumstances, such as low profit margins or inaccurate inventory forecasting. If your company spends too much of its own money on a strong sales performance, there could be very little excess earnings. Working capital loans, by definition, supply funds that would otherwise have come from your cash reserves.
Knowing you have to repay a business loan can also stop you from making unwise, post-holiday spending decisions. It’s tempting to take in or spend excess earnings, rather than saving it. Your business loan will remind you that your first move should be to create a budget. At United Capital Source, our business financing experts are more than happy to help you establish the budget you need to stabilize your finances when revenue dips after the holidays.
3. Expanding your online presence
A busy season is loosely defined by peak interest in your industry. Consumers will be doing their research and remembering which businesses have made the most effort as of late to attract attention. So, in the months leading into the holidays, it’s crucial to make sure your business’s accessibility and connection to past customers are at their peak as well. Maybe you need to hire a private digital marketing firm to create Google and Facebook ads that target Internet users who are most likely to buy your products. Maybe you need to step up your email marketing. If your business has an eCommerce function, maybe you need to improve your system so that it can handle an increase in traffic.
All of these things come with a cost, but you’ll have to spend much more money if they go neglected or are postponed until the last minute. Working capital loans allow you to coordinate the strength of your online presence with consumer interest. You don’t want to worry about wasting money on the wrong digital marketing initiatives in the final weeks before the holidays.
4. Gaining access to other business financing options
Working capital loans are the among the easiest small business loans to pay back. A short-term working capital loan can be paid back in full in less than six months. Once the debt is all paid off, you will likely become eligible for a second, larger round of funding. So, it might be a good idea to take out and pay back a working capital loan before the holidays in order to gain access to a higher amount when demand begins to rise. You could even pursue a more appropriate business funding program, like a business line of credit. This will let you buy extra inventory, hire extra workers, or correct other mistakes right before it’s too late.
No matter what you do to prepare, uncertainties are a staple of the holiday season. You need a business lender that is able to respond quickly and modify your repayment structure in the event of a potential emergency. If you choose United Capital Source, this will be your first holiday season where you aren’t on your own when expenses surpasses your every anticipation.
Mario Garcia has been in the financial services industry for more than 20 years.