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Seasonality
Also called seasonal revenue, seasonal business.
A predictable annual swing in revenue that makes averaged bank deposits a poor guide to what a business can afford to pay in its slow months.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Underwriting usually averages deposits over three to twelve months and sizes an offer against that average. For a landscaper, a tax preparer, a ski shop or a school-bus contractor, the average is a number the business never actually earns in any given month. A fixed daily or weekly debit set against the average is comfortable in peak season and destructive in the trough.
The better underwriters look at the low months specifically, count negative days and NSFs in the off-season, and either shorten the term so repayment lands inside the strong period or size the payment against trough revenue. Products with a genuine percentage-of-receipts remittance — split funding, revenue-based financing — self-adjust because the payment moves with sales.
On a fixed-payment advance the theoretical fix is the reconciliation clause, which resets the debit to the contracted percentage of actual receipts. Whether that clause is automatic or requires a written request with supporting documents is a contract-by-contract question, and it is the single most important thing a seasonal business should read before signing.
Where this one catches people
A seasonal business signs in its best month, when statements look strongest and the offer is biggest. The offer is sized on peak deposits and the term runs through the trough. Nine weeks later the debit that was three percent of receipts is thirty percent, and the reconciliation clause everyone described verbally as automatic turns out to require a written request, a fresh statement and the funder's approval.
Worked through
Illustrative only. Deposits: $150k a month for four peak months, $25k a month for eight. Twelve-month average is roughly $67k. A daily debit sized against $67k of monthly revenue consumes a manageable share in peak season and roughly two and a half times that share of actual receipts in a $25k month — before payroll, rent or inventory.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Seasonality — common questions
What does seasonality mean?
A predictable annual swing in revenue that makes averaged bank deposits a poor guide to what a business can afford to pay in its slow months.
Where does seasonality catch people out?
A seasonal business signs in its best month, when statements look strongest and the offer is biggest. The offer is sized on peak deposits and the term runs through the trough. Nine weeks later the debit that was three percent of receipts is thirty percent, and the reconciliation clause everyone described verbally as automatic turns out to require a written request, a fresh statement and the funder's approval.
Is seasonality the same as an interest rate?
Seasonality is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does seasonality apply to?
Merchant Cash Advance, Working Capital, Business Line of Credit, Revenue-Based Financing.
Is there a worked example of seasonality?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside seasonality?
Average daily balance, Negative days, Reconciliation, Split funding, Variable payment.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.