Quick overview

Seasonal businesses (retailers, agriculture, tourism, specialty services) face concentrated revenue windows. Working capital loans bridge the gap between expenses and revenue. The goal of structuring repayment is simple: make payments when cash is available, not when the business is thin.

Why structure matters

  • Poorly timed payments can trigger late fees, higher interest, or default during off-season months.
  • Thoughtful structures free up cash for inventory, payroll, and marketing ahead of peak periods.

Common repayment structures that work for seasonal firms

  • Peak-only or seasonal payments: Payments are scheduled during the months you expect strong cash inflows. Lenders may require documentation of historical seasonality.
  • Interest-only with seasonal principal payments: You pay interest during slow months and larger principal payments during peak months.
  • Revenue-based repayment: Payments are a fixed percentage of sales—useful for variable sales patterns but can cost more over time.
  • Revolving line or renewals: Use a line of credit that you draw and repay each cycle; flexible but requires discipline and monitoring.
  • Reserve/holdback account: Lender or borrower sets aside a percentage of peak receipts into a reserve to fund off-season payments.

Real-world example (simple)

  • A beach rental business earns 70% of revenue in June–August. It borrows $60,000 for winter maintenance. The lender agrees to interest-only payments Nov–Apr and principal amortization July–Sept when revenue is highest. This keeps cash available off-season and reduces repayment strain.

How to set up repayment that fits your business

  1. Build a three-year seasonal cash-flow projection. Include worst-case scenarios (30% sales decline). See our guide on preparing forecasts for loan applications for templates and examples: Preparing Working Capital Forecasts for Loan Applications.
  2. Share historical monthly revenue with prospective lenders; patterns matter more than a single year.
  3. Negotiate a structure tied to revenue seasonality—interest-only, seasonal amortization, or a percentage of gross sales.
  4. Ask for payment holidays or delayed principal start dates that coincide with ramp-up periods.
  5. Build a reserve equal to one to three months of fixed costs as a shock absorber.

Red flags to watch for

  • Lender refuses flexibility or won’t consider your seasonality data.
  • Effective annual cost hidden by fees, origination charges, or prepayment penalties.
  • High-cost merchant cash advances or daily-debit products that seize cash flow.

Costs and rates (what to expect)

Rates vary widely by lender and product. Traditional bank products—SBA or lines of credit—typically offer lower rates and clearer amortization; nonbank short-term advances can be much more expensive. Compare APR, fees, and prepayment rules before signing. For consumer-focused guidance on loans and costs see the Consumer Financial Protection Bureau (https://www.consumerfinance.gov).

When to prefer a line of credit vs a term working capital loan

  • Use a line of credit if your needs fluctuate each season and you can manage ongoing draws and repayments. See our comparison: Working Capital Loans vs Lines of Credit: Choosing for Growth.
  • Choose a term loan for a one-off seasonal expense (large inventory buy or equipment purchase) when you can match amortization to sale months.

Practical tips from practice

In my practice advising seasonal operators, the best outcomes came from combining a modest reserve with a flexible repayment schedule and strong monthly cash forecasting. Lenders respect data—present clear monthly revenue history and a conservative forecast.

Checklist before you sign

  • Do monthly projections and stress-test them.
  • Confirm exact payment dates and whether they can shift year to year.
  • Ask for a full APR disclosure and total repayment cost.
  • Verify any reserve/holdback mechanics in writing.
  • Get lender agreement to a seasonal repayment plan in the loan documents.

Further reading and resources

Professional disclaimer

This article is educational and not individualized financial or tax advice. For tailored guidance, consult a CPA, your lender, or a qualified business financial advisor.