This is especially true for industries where the end-of-year rush is followed by a summer lull, a time when cash flow can become strained.

Invoice-based businesses are most vulnerable to this cash flow squeeze. They cannot spread out their income evenly over the year and are more exposed when their customers are slow on payments. Cash flow is king, and no business can afford to ignore it.

Timing of demand varies

As a broker, you can help your clients by understanding how they operate and therefore help them plan ahead. If a problem with cash flow is looming, a small business loan with predictable repayments may help take the pressure off your clients.

Experienced businesses tend to look ahead and apply for finance in November and December because they know the traditional cash flow squeeze is coming. Less experienced businesses apply in January with a need for immediate funding for working capital.

Most of the demand for loans at this time of year comes from companies in the retail, hospitality, professional services, and building/construction sectors. These businesses are usually looking for finance to provide additional working capital to cover extra stock, holiday payroll, expansion and late payment on invoices.

But the timing of that demand varies from one sector to another. So, knowing the nature of your clients’ businesses, what stresses they come under, and when they are most vulnerable is the key to helping them get extra funding when they need it most.

Prospa tip: Analyse your client list to see which sectors your clients operate in. Do they need funds to prepare for a busy period, or a cash boost to keep them afloat during a quiet time?

Holidays can be spoiled by cash flow woes

For most retailers, Christmas is the most profitable time of the year. But gearing up for the seasonal rush means many business owners have to purchase high levels of inventory from as early as October.

Often they have to wait to turn that stock back into cash. It can be an anxious and expensive exercise, and some retailers may need a short-term loan to cover the cash flow lag.

In construction, businesses face a similar situation. The industry virtually shuts down over the festive season, but companies need to buy materials well before that so they can hit the ground running in late January.

For restaurants, November and December are traditionally the peak season. January is then a time for renovating the premises and upgrading the kitchen – an expensive upfront investment that will pay itself off slowly over time.

Many cafés also experience their busiest time in December and, for those located near the beach or other holiday attractions, the good times roll on into the holidays.

But cafés in business districts and industrial parks are often deserted over the summer as customers strip off their coats and ties and head for the water. Like restaurants, these cafés see January as a time to remodel and re-equip.

Professional services companies experience high demand in December as their clients prepare to wrap up the first half of the financial year. Many then close their doors for a breather but, unlike their staff, business expenses like rent, salaries and tax obligations don’t take a break.

Prospa tip: Encourage your clients to forecast their cash flow needs and apply for a loan before things get tight. Their application will be better and their chances of success higher.

The right loan at the right time

The holiday season is a period of high demand as businesses navigate the traditional end-of-year cashflow squeeze. Small business owners are distracted thinking about their business when they should be enjoying time with family and friends. Prospa’s loans for small businesses can offer a solution to cashflow concerns during the holiday period and empower you to help your clients and grow your own practice at the same time.