For companies in India that see fluctuations in yearly revenue due to seasonal factors, securing financing can be tricky. When sales dip during the off-season, many seasonal businesses find it tough to qualify for traditional bank loans. However, equipment loans for small businesses allow these companies to obtain the equipment needed to maximise profits during their peak periods.
If you own a seasonal company, here’s how taking equipment financing for seasonal businesses can boost your bottom line when production ramps up.
Invest in Productivity-Boosting Equipment
Equipment financing for seasonal businesses allows seasonal enterprises to purchase new equipment right before their busy season starts. With up-to-date machinery, your staff can produce more efficiently to meet higher demand. Investing in the latest equipment can also help you:
- Automate processes to reduce labour costs
- Improve product quality and capabilities
- Reduce material waste and scrap
- Speed up production times to meet tight deadlines
- Minimise machine downtime and maintenance issues
New equipment purchases can range from ₹3-4 lakhs up to ₹3-4 crores or more. Machinery financing provides flexibility to acquire advanced equipment that may be otherwise unaffordable.
Tap New Revenue Streams
For companies that see a dip in sales post festivals or seasons, new equipment can help tap alternate revenue sources during the off-season.
For instance, a wedding tent rental company could utilise equipment financing for seasonal businesses to procure industrial sewing machines and fabric cutting machines. Their staff could then manufacture chair covers, napkins, table cloths and related items in the monsoon months.
On the other hand, a small-scale papad manufacturer may use loans for machinery purchase to invest in packaging equipment to provide private-label pouches and boxes during their slow season.
Advanced digital production machinery can also allow companies to profit from online sales and custom orders year-round.
Gain Competitive Advantage
Older equipment that’s prone to breaking down can prevent seasonal companies from completing rush orders during their critical selling seasons. Newer machinery not only stays up and running but can provide advantages over the competition.
For example, the latest garment manufacturing equipment can create custom embroidered uniforms with fast turnarounds. The newest fruit processing machinery may allow seasonal canning facilities to offer high shelf-life and low-acid speciality products. And new refrigerated vehicles may allow dairy brands to accept more milk during peak months.
Upgrading to the latest equipment can allow seasonal businesses to provide higher quality, greater efficiency, more flexibility and better customer service than competitors. This strengthens their reputation and repeat sales.
Improve Working Conditions
Operating outdated machinery can negatively impact worker productivity and morale. Investing in new equipment can improve working conditions and safety. Some benefits include:
- Greater precision can prevent hand strain and fatigue
- Added guards and sensors can enhance operator safety
- Ergonomic designs may lessen bodily wear and tear
- Quieter machines will decrease noise pollution
- Programmable controls can reduce monitoring needs
By improving the workplace environment, new machinery can also help seasonal companies retain and recruit enough qualified workers.
Leverage Affordable Financing
Traditional bank loans often require strong financials, significant assets and a positive track record. Startups and companies that experience extreme revenue fluctuations may find it difficult to qualify.
But, equipment financing for seasonal businesses opens up funding with:
- Irregular cash flows
- Limited assets and history
- Credit damage from low seasons
- Existing debt and expenses
Instead of relying solely on financial statements, equipment loan companies also consider projected revenue from the new machinery itself. This allows more seasonal businesses to secure funding.
Loan features like deferred first payments can allow borrowers to align repayment with income highs from their busy season. This matches costs to revenue. Extended terms from 3-7 years can keep payments affordable after purchasing machinery.
Preserve Capital
In most cases, equipment financing for seasonal businesses provides fixed-rate financing, meaning predictable payments that don’t fluctuate over time. This allows seasonal businesses to preserve working capital.
Companies can leverage financing rather than using their savings. Holding onto capital provides a financial cushion during the off season.
Some equipment loan providers also offer 0% down financing options. This means 100% financing is available. Zero-down financing can maximise capital preservation.
Then, as profits rise during peak season, those gains remain available for other operational expenses. Equipment financing for seasonal businesses helps avoid cash flow disruptions from equipment purchases.
Weigh the Benefits
If your business sees large fluctuations in seasonal income, equipment financing can help build productivity and profits exactly when you need it. Weigh the benefits of gaining new capabilities, tapping new revenue streams, improving operations and retaining capital.
Conclusion
With proper strategic planning, equipment loans for small businesses allow seasonal businesses to smooth out cash flows and minimise the ups and downs during off-seasons. Equipment financing for seasonal businesses provides flexible financing that can be tailored to your unique business needs and revenue profiles.
