How To Financially Manage Business Closure Over The Holidays 

The holiday season is upon us, and an increasing number of businesses are shutting down. Business owners may need to start planning for business operations during holiday closures.

During such times, it is crucial to cover overheads and other expenses to keep business operations running. SMEs should implement measures such as maintaining a clear budget, having effective financial management strategies, or establishing a backup plan to manage a healthy cash flow.

Surprisingly, many businesses tend to overlook the option of securing a Business Line of Credit loan. Such “safety net” could be invaluable in managing cash flow during business closure.

Let’s delve deeper into how you could potentially leverage a Line of Credit as a tool to effectively control your cash flow.

Understanding a Business Line of Credit

Regardless of the timeframe, there is a high chance that you might need constant access to financial resources to support your business’s cash flow. Especially during the closing period in the festive season, from a financial management perspective, this may not be the most favourable time.

A Business Line of Credit could be very handy when you can’t rely on sales to keep the business running. Picture it as a business overdraft, similar to a credit card, where you are granted a predetermined limit and can withdraw funds as needed.

It’s straightforward and super simple! As long as you stay within your limit, you can withdraw any amount you need.

And here’s the best part: You are charged interest solely on the amount you borrow.

For instance, if your limit is $200,000 and you borrow $50,000, you’ll only pay interest on the utilised $50,000, not on the entire $200,000.

Let’s Take a Closer Look at a Specific Scenario…

As the holiday season approaches, Andrew, the owner of a local retail store needs a plan to manage business closure over Christmas and New Year. 

Understanding the potential impact on cash flow during this period, he decides to proactively tackle the situation. Mark opts to utilise a Line of Credit loan as one of the options to ensure financial flexibility and continuous access to funds. 

Andrew has now been approved for a Line of Credit with a borrowing limit of $100,000. However, he only needs additional financial support to cover certain holiday-related costs and potential fluctuations in revenue, so Andrew decides to draw down a modest amount of $20,000. 

As a result, the interest payments will be manageable, given that they will be based solely on the utilised $20,000, adding to the benefits of strategic financial planning during seasonal fluctuations.

Andrew can ensure that the store remains operational despite the temporary business closure during the holiday season.

The flexibility of a Line of Credit can help Andrew and other business owners to cover regular operational costs, maintain a steady cash flow, and address any unexpected expenses that could arise during the holidays. 

Benefits of a Business Line of Credit

With a Business Line of Credit, you have the ability to borrow a specific sum of capital each year, similar to personal credit. 

Payments are made solely on the utilised credit. This could help SMEs handle cash flow gaps or unexpected expenses until adequate funds are available. 

Even if your business doesn’t require a substantial lump sum of cash upfront, there may be instances when certain financial needs are temporarily beyond reach. 

In such cases, a Business Line of Credit could be a valuable remedy. Offering a convenient and flexible form of ‘revolving’ capital, it allows you to borrow the necessary funds precisely when the need arises.

Furthermore, the constant access to funds can provide a financial safety net. It can help SMEs not only manage business closure effectively but also position them for a smooth reopening in the New Year. 

Ways to Use a Line of Credit to Better Manage Cash Flow:

Establish a Suitable Credit Limit

It is important to clearly determine an appropriate credit limit based on your business needs and financial situation.

Ensure the limit is sufficient to cover expected expenses to adequately manage business closure. 

Borrow Wisely

A Business Line of Credit could offer great flexibility. So business owners should borrow only what is necessary to cover anticipated expenses and mitigate cash flow gaps.

Make sure you understand the terms and conditions of the Line of Credit, including interest rates and repayment terms.

Utilise Funds Strategically

Line of Credit funds could be a great tool to cover essential costs for you to better manage business closure. 

Prioritise payments to ensure critical obligations are met, such as employee salaries and utility bills.

Monitor Cash Flow

One of the most important tasks is to regularly monitor your business’s cash flow during this time.

By doing this, SMEs can keep track of expenses and revenue to ensure the Line of Credit is used effectively.

Plan Your Repayments 

To avoid late payment fees, business owners should remember to develop a repayment plan once the business reopens.

Consider how the business will generate revenue to repay the Line of Credit while sustaining ongoing operations.

Communicate With The Lender

Business owners should maintain open communication with their lender. If there are any challenges in repayment, discuss potential solutions or adjustments.

Strategically Reopen Your Business 

Plan for a strategic reopening post-holiday closure, considering any changes in consumer behaviour or market conditions.

Leverage any trends or anticipate changes in market conditions to boost sales or tackle new challenges.

Evaluate And Adjust

After the holidays, spend some time assessing the effectiveness of using the Business Line of Credit.

Once you have a better understanding of your business’s cash flow and current strategies, you can adjust future plans based on lessons learned to better manage business closure. 

Ready to Apply for a Lumi Line of Credit?

Lumi has recently introduced an improved version of its Low-Fee Business Line of Credit with no drawdown fees or ongoing expenses. This product is designed to offer businesses total transparency concerning their repayment schedule.

With this new “money on demand” solution, you can enjoy flexible access to funds, adapting to the dynamic needs of your business. 

The Business Line of Credit is an ongoing credit facility with repayment terms extending up to 5 years. This provides an extended timeframe to effectively manage your financial commitments.

Lumi’s Business Line of Credit is also cost-effective. You will only need to pay a one-off establishment fee, determined by your credit limit. 

Importantly, there are no hidden fees. You can proactively plan your finances without the concern of unexpected charges, especially when managing business closure. 

Check your eligibility for the Lumi Line of Credit here. Alternatively, you can reach out to our friendly team members at 1300 005 864 to find out more about it.

Conclusion

Successfully managing business closure over the holidays requires thoughtful financial planning and proactive measures. By implementing certain financial strategies, you can ensure your business not only survives the holiday closure but also thrives in the new year.

Harnessing the flexibility of a Business Line of Credit can be a strategic move for businesses facing closure during the holidays. It could provide the means to cover essential expenses, manage cash flow gaps, and maintain operational stability. 

The Business Line of Credit could become a crucial tool in ensuring financial resilience and sustaining business momentum through the festive season and beyond.