Working Capital for Seasonal Franchises with a Winter Slowdown

If your franchise is seasonal (or weather-sensitive), winter can create a cash-flow squeeze even when your annual numbers look strong. The right financing is the one that matches your cash cycle—not just the lowest headline rate.

The decision framework: match the loan to the cash-flow gap

Recurring, unpredictable gaps

Prefer a business line of credit so you only pay interest on what you draw and can re-borrow as you repay.

One-time spend (inventory, marketing)

Prefer a term loan when you need a lump sum and predictable payments.

Large need + time to plan

Consider an SBA loan for longer terms and lower rates if you can wait through underwriting.

Line of credit vs term loan: typical rates, fees, and best use cases

Feature	Line of Credit	Term Loan
Best for	Seasonal gaps, payroll smoothing, ongoing needs	One-time spend: inventory build, remodel, marketing push
How you get funds	Draw as needed up to a limit	Lump sum upfront
Typical cost	Often ~8%–25% APR depending on lender/credit	Often ~10%–30% APR depending on term/credit
Common fees	Origination/setup fee, possible draw fee, sometimes annual fee	Origination fee, sometimes prepay fee on short-term products
Repayment	Interest-only period or amortizing draws	Fixed payments over a set term

Note: Exact rates and fees vary widely by credit, time in business, cash flow, collateral, and lender program.

Example: “I need $75k in revolving working capital”

When a line of credit fits

If you draw $25k–$75k during slow months and pay it down as revenue returns, a LOC can be efficient because you only pay interest on the drawn balance.

It’s also better if you don’t know the exact timing of gaps (weather, staffing, local demand).

When a term loan fits

If the $75k is for a defined plan—like a winter marketing push, a bulk inventory buy, or a small remodel—predictable payments can be easier to budget.

If you’d keep the LOC balance high most of the year anyway, a term loan can be cheaper and simpler.