Funding Holiday Success: How a Christmas Business Loan Can Boost Your Business
The Christmas season can be a very challenging period for small businesses. After all, there are additional year-end expenses to keep in mind — such as holiday bonuses for employees.
As such, giving businesses fast access to cash loans is essential.
This quick guide will explain what a Christmas business loan is and some general advice on how they may be able to help you cover Christmas expenses.
What Are Christmas Loans?
A Christmas business loan is designed to give your business a boost during the holiday season.
Here are some reasons why small- or medium-sized businesses may need a Christmas business loan to offset holiday financial stress.
- Christmas gifts or bonuses for employees
- Seasonal business trends, such as needing to re-hire seasonal and temporary workers
- Supplies and equipment to re-stock and sell more of a certain product or service during the holidays
- Other end-of-year expenses, like contracts that need to be immediately paid out and finalised
Businesses outside the entertainment and retail industry may have a quieter holiday period. However, let’s say you’re a gym owner, for instance. You can still use funds from a Christmas business loan to potentially keep your business afloat.
This small loan may have an establishment fee — an application or upfront fee used to cover the costs of processing your application.
What Are the Eligibility Criteria for a Christmas Loan?
The specific requirements for a Christmas business loan may vary among lenders. However, below are some common criteria you can expect.
- Credit score – Lenders often consider your creditworthiness when approving a Christmas business loan. A good credit score increases your chances of loan approval and may lead to a more favourable interest rate. A bad credit gives you the opposite, or you might not be accepted at all.
- Residency – You must be an Australian resident.
- Loan amount – The loan amount you’re eligible for may depend on your financial situation and the lender’s policies. Smaller loans may have more lenient eligibility criteria.
- Documentation – Be prepared to provide the necessary documentation, such as identification, proof of income, and bank statements, as part of the loan application process.
How to Decide if a Christmas Loan Is for You
Deciding whether a Christmas loan is the right choice for you requires careful consideration of your financial situation and goals. Look at the statements below:
- You need help covering Christmas costs
- You plan to borrow at least $5,000
- You can afford to consistently pay back the loan
- You meet eligibility criteria of lenders
- You didn’t default on an existing loan
If you answered yes to all the statements, then a Christmas business loan may be a valid finance solution for you.
Different Types of Christmas Loans
Now it’s time to choose your loan type. Here are some loan options.
- Credit card cash advances – If you have a credit card, you can use it for cash advances to cover your holiday costs. However, these usually have a higher interest rate and additional fees.
- Payday loans – These provide quick cash, but they might not be the best option if you’re strapped for cash. That’s because they come with high interest and short repayment periods.
- Online lenders and peer-to-peer loans – Online lending platforms and peer-to-peer lending networks offer loans at competitive rates.
- Credit union loans – Credit unions may offer holiday-specific loans with favourable terms to their members. These loans often come with lower rates compared to traditional banks.
- Secured loans – A holiday loan is normally unsecured. However, if you own valuable assets like a car or property, you can use them as collateral to secure a loan. Secured loans typically have a lower interest rate due to the reduced risk for the lender — but there’s a risk of losing the asset if you fail to repay the loan.
Christmas Business Loan Terms
Whether you’re looking for a small loan or one without variable rates and hidden costs, there’s a holiday loan for you.
Check the comparison rate and other terms, such as those below, to determine if you can pay it back within the specific loan period.
Interest Rates
Your loan’s interest rate may vary depending on the lender, and you might get a fixed or variable interest rate.
You can watch out for special offers from some of them. Like Lumi’s Rate Ease™ for example, which offers eligible businesses a rate-reducing loan that automatically lowers the interest rate every month as you pay along. We also offer special loan benefits such as Payment Holiday, which allows eligible customers to get funding now and only pay back 6 weeks later, which would get you to the new year. Meaning that you’d get the funds to help you navigate the holiday season without the added pressure from the loan repayments.
Maximum Loan Amount
The maximum loan amount depends on the lender as well, but Lumi can offer business loans and lines of credit from $5,000-$500,000.
Loan Term
A loan term normally ranges from 62 days to 48 months, depending on the lender.
Here at Lumi, a short-term loan has a repayment period of up to 12 months, while a long-term loan can be repaid over 12 months or longer — sometimes running for as long as 3-5 years.
Benefits of Christmas Loans for Your Business
There are several benefits to getting a loan for business purposes.
- They’re normally unsecured.
- They have a fast approval process, so you can typically get your loan application within the same day to a few business days.
- You can break up expenses from the past few months into monthly payments.
- May have lower APRs than credit cards (provided you have good credit).
Conclusion
If you don’t want to spend Christmas Eve wondering how to keep your business running, you may want to consider taking out a holiday loan if that’s an option.
It may come with an establishment fee, but it meets customer needs while helping you generate much revenue by giving you fast access to varying loan amounts. In fact, you can get the funds in your bank account on the same day!
However, you may also want to look at the comparison rate since it’s what helps you identify the true cost of a loan, so you have an idea of how much you’ll really need to pay back.
