In order to grow your business, you must be able to provide the necessary funding for growth. When it comes to getting a loan from a bank or other financial institution, what are some of the questions they ask?
A mortgage loan officer is a person who helps people with loans. They can be anywhere from banks to private lenders. A seasonal business may need to hire a loan officer, and this article will help you answer some of the questions they might ask.
Whether your company’ busiest season is summer or winter, all seasonal enterprises are better positioned for success when peak-season money is utilized to fund expansion rather than recoup previous costs.
But, given the downtime that comes with owning a seasonal company, how can you guarantee that you have the money you need to maximize in-season possibilities while maintaining a steady cash flow throughout the off-season?
Asking your bank for a small business loan may be an effective answer if you’ve been monitoring your cash flow and you’ve gotten ahead of the situation before you’re in a slow-season crisis. Many seasonal company owners face additional scrutiny when it comes to obtaining a loan, since lenders are aware that cyclical downtimes may result in financial difficulty.
To assist seasonal companies in preparing for a meeting with a lender, we’ve developed a list of five questions to anticipate from a loan officer—questions that you should also include in your business plan. Regardless of the season, how you respond to each question might provide new insights that can help your company grow.
1. How do you fund your company expenditures during the off-season?
Even if your firm shutters fully during the summer, lenders understand that there will still be obligations to pay, such as rent, utilities, and potentially some year-round personnel, as well as your own wage.
There are three common strategies to offset these costs:
Profits made during the preceding busy season
This is the perfect circumstance since your company will still have enough capital to start the following business cycle strong. However, if you consume all of your income to meet expenditures and have nothing left over to reinvest the next year, you may be jeopardizing long-term development.
Using short-term debt to tide you over until the next high season, such as credit cards and lines of credit
If you rely on short-term debt to pay your payments, you’re setting yourself up for a long-term problem. You’ll always look backwards, not forwards, as you begin a new hectic season. Your payments will likely be greater and more difficult to budget if you have short-term debt.
A loan for a small company
A small company loan may help you budget for spending while also providing a buffer to let you start each season strong. Keep in mind that getting a loan before you need it is the best option since you’ll be able to search around for the best loan conditions and avoid being stuck with a predatory loan.
Applying before you’re financially squeezed demonstrates to lenders that you’re proactive about developing and managing your firm.
2. What measures do you put in place to guarantee that you have enough cash on hand to get through any sluggish periods?
It’s critical to manage cash flow during lengthy sluggish times in any firm, but especially in seasonal industries. Pay invoices before you shut for the season to reduce outstanding short-term debt (as opposed to longer-term debt, such as small company loans).
Demonstrate to prospective lenders that you have processes in place to manage inventory, employees, marketing, and other aspects of your business.
3. Have you considered ways to create income during the off-season?
Seasonal businesses exist for a variety of reasons, including weather, geography, and client preferences. Lenders are aware of this fundamental concept, but they’ll want to know whether you’ve tried revenue-generating strategies to supplement your cash flow throughout the offseason.
A landscaper, for example, may handle snow plowing in the winter, while a ski resort would offer mountain bike and hiking tours on its slopes during the summer.
Brands are year-round, even if your primary business is seasonal. Customers who adore you in the summer continue to think about you in the cold (and vice versa). Profit from this by selling products online that are relevant to your company and will help you establish your brand while earning year-round revenue.
4. What is the cash flow demand for peak season operations, and how do you fund it?
Lenders understand that you can’t have a successful peak season unless you have cash on hand to invest in the months leading up to it, so they’ll want to know what it takes to get your company up and running during peak season.
They can assess whether you’re mostly spending new money to pay off old debts, or if you’re well-positioned to take advantage of peak prospects via enough personnel, new inventory and products, marketing, advertising, and other company growth chances. When applying for a loan, consider your whole business’s demands and cash flow, rather than simply covering slow-season expenses.
5. What are your personnel requirements, and how do you budget for them?
Employees are almost every business’s primary expenditure, and seasonal enterprises must continually spend more each year in recruiting, training, retention, and seasonal separation. Lenders want to know that you’ve budgeted appropriately for these costs.
Explain your peak staffing requirements, how you recruit and retain competent personnel, and what happens to them during the summer. Show how you’ll cover that expenditure without jeopardizing your company’s viability if you pay workers year-round to maintain valuable staff. Show lenders how you intend to streamline and arrange training procedures and other operational concerns during slower months to optimize efficiency and save expenses.
Year-round management and planning are still required for seasonal enterprises.
Even if your company is only open for a few months during the summer or winter, there is still a lot you can and should accomplish all year:
- Use the calmer months to reflect on the previous season and make plans for the next one.
- Maintain your brand by keeping in contact with the consumers and communities that are important to you.
- Plan ahead and consult with lenders about financing possibilities if you know your firm may suffer financially during the quiet periods. Many small company loans are available with favorable rates and conditions, making it simpler to get through sluggish periods and allowing you to get a head start on peak season.
Many successful seasonal company owners don’t consider their operations to be seasonal at all. Instead, they realize the cyclical nature of their business and utilize slower periods to improve operational efficiency while maximizing revenue-generating possibilities at busy times. Demonstrate to potential lenders that you share their views, and your company will be in a better position to get the cash it requires.
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Frequently Asked Questions
What questions does a loan officer ask?
A: A loan officer will ask many questions to determine what a persons income is and their ability to repay the loan. They may also be looking into other people who might have co-signed on the loans or checked your credit history.
How do you manage a seasonal company?
A: To manage a seasonal company, you should be sure to have plans for what your annual goals are. You can also focus on doing things that make revenue throughout the year.
What questions should I ask a borrower?
A: The following questions are a few of the many that you might want to ask.
-What do you need this for?
-How much will it cost me?
-When can I expect your return on the loan?
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