Are you prepared for the holiday rush? While the holidays can bring excitement and joy, they can also be a stressful time for the unprepared small business owner, especially when it comes to finances.
Working capital is the lifeblood of a small business—it’s the money your business needs to manage the day-to-day operations and transactions. Your working capital affects your ability to meet your monthly expenses, like rent, payroll, inventory and others. While most small businesses expect a significant spike in sales over the holidays, if you’re not prepared to meet some of the short-term, upfront expenses needed to keep your business viable, your business could really struggle these next few months. If you’re concerned about the cash flow of your business, it might be time to consider taking out a small business loan or a line of credit to get you through the holidays.
We’ve made a list (and checked it twice) of the top four reasons why taking out a small business loan or line of credit could be a smart move for you this holiday season:
Smart Reason #1: You Need to Hire Seasonal Staff
Having enough employees to keep your small business functioning and running smoothly can mean you need to hire additional, seasonal employees. Sales associates, gift wrappers and customer service representatives all require money to find, hire and train. Enlisting extra help over the holidays is a smart move, and a small business loan or line of credit can help you cover the costs.
Smart Reason #2: You Need to Pay for Any Overtime
Small businesses tend to keep longer hours during the holiday season to accommodate their shoppers, which means longer working hours for you and your staff. Some part-time or contract employees could work more than 40 hours a week, resulting in overtime pay. Federal and state laws require employers to pay overtime, which is typically “time and a half” of your employees’ hourly wages. Having additional working capital gives you some margin to pay for any unexpected overtime your employees have without adding stress on you or your cash flow.
Smart Reason #3: You Need to Purchase More Inventory Than Usual
If you own a retail business, chances are you make the majority of your sales during the holiday season. This means it’s absolutely vital to have enough inventory on hand to meet the holiday demand. Unfortunately, inventory can be one of the biggest expenses for any business. Most small businesses may not have the working capital on hand to make a large, upfront inventory purchase prior to the holiday season, which is where a small business loan can come in handy. Small business owners can secure term loans or lines of credit quickly, and if there is no prepayment penalty, your small business can pay it off after the holiday season.
Smart Reason #4: You Need to Increase Marketing Efforts
The holidays are a great time to show your customers how much you appreciate them, which means increasing your marketing budget to accommodate any holiday cards or gifts you may want to send their way. You should also consider increasing your marketing budget to help promote and advertise special sales or holiday events happening with your business—whether through online ads or putting up posters around town.
At the end of the day, having additional working capital on hand can give you peace of mind this holiday season for your small business and help you focus on the things that really matter, like peace on earth and good will toward men. Happy Holidays!