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Seasonal Advance Rates
Last Updated: Jun 7, 2019
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A revolving line of credit fluctuates with a customer’s working capital needs on a seasonal or cyclical basis.
Some industries are naturally seasonal, and the borrowing needs for companies that operate in seasonal industries can fluctuate dramatically with the industry. For example, a ski shop will see an increase in demand for its products leading up to and through the winter season, while demand will wane and trough through the summer season. As a result, the company will be required to purchase a large amount of inventory as they approach the busy season, and may need additional borrowings to finance the purchases. Seasonal advance rates allow a company to borrow incrementally more, (e.g. an extra 5-10% against inventory and A/R) to finance the business when working capital may be stretched.