Financing a Seasonal Business

The principal in a family owned lumber/hardware business established in 1947 had long been familiar with his local SBDC and had often referred clients to the center. However, it was not until the client recently retired from his regular job and became more actively involved with operation of his family business that he realized that there were some cash flow issues that need to be addressed so he enlisted the services of the SBDC.

The discussion centered on the cash flow issues relating to past-due accounts receivables, slow payment on accounts payables and loans from stockholders. A collection letter was created and mailed to certain customers listed on the aging of accounts receivable list. Also, based on the overall analysis it was determined that an installment loan and a line of credit would be the best course of action.

The client began shopping his loan request around town to find the best interest rates and terms. The client was able to obtain a $100,000 installment loan along with a $75,000 line of credit from a local community bank. The funds will be used for working capital and will help smooth out the seasonality of the business. This loan helped retain twelve existing jobs.