Living in Indianapolis, IN assures you a full 4-season experience. We have cold Winters, often with intermittent snow and rain, typically great Springs, wonderful Falls, and hot Summers with lots of humidity in between.
Although I enjoy the changing seasons, they can wreak havoc on an otherwise strong company’s working capital. For example, if your business is construction-related, your liquidity needs can vary wildly throughout the year. The same thing can apply to apparel companies, retailers, distribution businesses, and others.
This issue typically arises prior to the company’s busy season. Leading up to peak production, companies find themselves with significant purchasing requirements at a time when they have very little assets (i.e. receivables) to borrow against. In some instances, companies can work with their senior lenders to provide some form of seasonal increase in their borrowing facility / advance rates to provide some relief, but even this type of accommodation is often not sufficient.
As you work to assure that your company has enough working capital to meet seasonal demands, this may mean considering additional equity or subordinated debt.
You may also consider an alternative option – Tradecycle. We work with companies across various industries and dealing with seasonality is a common theme. Check out this CASE STUDY that describes our relationship with a vertically integrated asphalt company to learn more.
Enjoy the remainder of the Winter as Spring is just around the corner!
Justin Goheen
President & Founder
Tradecycle Capital LLC
jgoheen@tradecyclecapital.com