Drawn through the trough, cleared through the peak.
This is the pattern a revolving facility was designed for, and the one it handles best. It is also the pattern where a facility quietly stops clearing, and the sign is visible a year before it matters.
Last reviewed 8 September 2026
Indicative interest cost
Weekly
$213/week
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $180,000 scenario
$85,000 drawn at 13.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
The short version
Five lines about the seasonal curve.
- The deepest point is not in the trough. It is at the pre-season build, when stock and staffing are paid for before any revenue has resumed.
- The limit should be sized to that peak. A facility sized on the quiet months alone runs out at exactly the point it is most needed.
- Arrange it in the peak. A lender assessing a seasonal business at its strongest offers different terms from one assessing it at its weakest, and it is the same business.
- A rising floor is the warning. The least drawn the facility gets each year, plotted across three years, is the single most useful number a seasonal borrower can keep.
- Indicative only. Every figure here is illustrative and no facility is offered here. Terms come from a lender after assessment.
The shape
What a healthy seasonal year looks like on the facility.
Through the peak the facility should be undrawn or nearly so, because revenue is arriving faster than costs. As trading falls away the drawing begins gradually, because fixed costs continue while income does not, and the balance accumulates through the quiet months at a fairly steady rate.
The deepest point comes at the pre-season build, when stock is bought, staff are hired and marketing is paid for before a dollar has come back. That is the moment the facility is doing the most work and the moment a limit sized only for the trough runs out.
Then the season starts and the balance falls quickly, because the peak generates cash faster than any other part of the year. A facility that returns to zero somewhere in that period is behaving exactly as designed, and one that stops a little short is worth paying attention to.
Peak trading
Facility at zero
Shoulder
Drawing begins
Trough
Steady accumulation
Pre-season
Deepest point
Worked example
Three years of the same facility.
A tourism operator holds a $180,000 limit. In year one the balance peaks at $140,000 in the week before the season and returns to zero in February. In year two it peaks at $150,000 and bottoms out at $12,000. In year three it peaks at $165,000 and bottoms at $34,000.
The peak figures look like the story and they are not. The important number is the floor, which went from zero to $12,000 to $34,000. That is $34,000 of permanent borrowing that the peak is no longer clearing, and it will be $50,000 or more next year if nothing changes.
Nothing in the year three figures looked alarming in isolation. The facility stayed within its limit, every payment was made, and the peak was the strongest of the three. The trend in the floor was the only place the problem was visible, and it was visible a full year before the limit would have been reached.
Illustrative figures
- Limit
- $180,000
- Year one floor
- $0
- Year two floor
- $12,000
- Year three floor
- $34,000
- Year three peak
- $165,000
Illustrative on stated assumptions. Not a projection for any particular business.
The number to keep
The floor matters more than the peak.
A seasonal facility is judged by whether it clears, not by how deep it goes. Recording the lowest drawn balance in each cycle, and comparing it against the two before it, takes two minutes a year and is the earliest available signal that the season has stopped covering the year. A rising floor across three cycles is telling the business something a profit and loss statement will not show for another twelve months.
Through the year
Three points where attention pays.
01
At the peak, arrange or review
A lender looking at the business in its strongest months sees twelve months including a peak. The same conversation in the trough shows three months of a business at its weakest. Nothing about the business differs and the terms available do, which makes timing the single most valuable decision here.
02
Before the build, check the headroom
The deepest drawing of the year is about to happen. Comparing the planned build against the remaining headroom, four to six weeks out, is what turns a shortfall into a conversation rather than an excess.
03
At the bottom of the drawdown, record the floor
One number, once a year, written down beside the two previous years. It is the whole of the early warning system for this pattern and it costs nothing to maintain.
Sizing it
Two ways to set the limit, and what each misses.
A seasonal limit sized on the wrong basis fails in a predictable way, and both failures are common.
| Feature | Sized on the trough | Sized on the pre-season peak |
|---|---|---|
| Covers the quiet months | Yes | Yes |
| Covers the stock and staffing build | No | Yes |
| Runs out | Weeks before trading resumes | Ordinarily not |
| Line fee cost | Lower | Higher |
| Typical outcome | An urgent limit increase | A facility that works |
The line fee on the additional headroom is the price of the second column, and it is ordinarily a few hundred dollars a year against the cost of an urgent funding conversation in the worst week of the year.
The pattern
What a revolving limit does well here, and what it does not.
What it does well
- Charges only for the months the money is actually needed
- Repays automatically as peak revenue arrives, with no schedule to fight
- Stays available for the following year without a new application
- Absorbs a season that starts late without any renegotiation
- Costs very little in the months the business is at its strongest
What it does not
- Force the balance down, which is what allows a floor to form
- Grow on its own when the business grows and needs more
- Survive a review where the position has weakened
- Distinguish between a deep season and a structural shortfall
- Fix a year where the peak no longer covers the trough
The honest test
What a floor that will not clear actually means.
A seasonal business is viable when the peak generates enough to cover the whole year including the trough. Where it does, the facility clears each cycle and the arrangement is stable indefinitely. Where it does not, the facility funds the difference, the floor rises, and each year starts a little further behind.
That is a business question rather than a funding one, and no limit increase answers it. The useful response to a rising floor is a full-year calculation of revenue against total cost including the funding, and then a decision about pricing, cost base or the shape of the year.
Naming it early is the whole advantage of watching the floor. A business that identifies the trend in year two has a year to act in. One that discovers it when the limit is reached has whatever time the lender allows.
The trade
What a revolving limit gives a seasonal business.
What it gives
- A cost proportional to the months the money is actually needed
- Automatic repayment as peak revenue arrives, with no schedule fighting it
- Availability the following year without a fresh application
- Tolerance for a season that starts two or three weeks late
- A very low cost through the strongest months of the year
What it does not
- Force the balance down, which is how a floor forms
- Grow on its own as the business grows into a larger build
- Survive a review conducted while the business is in its trough
- Distinguish a deep season from a structural shortfall
- Fix a year in which the peak no longer covers the trough
A practical note
Two seasons of statements beat any forecast.
A seasonal business planning a facility has a considerable advantage over most applicants, which is that last year already happened. Twelve months of closing balances plotted on one line gives the depth, the length and the timing of the trough more honestly than a forecast built forward from assumptions.
Two years is better again, because it shows whether the pattern is stable. Where the two curves have the same shape, the third can be planned with confidence. Where the second sits below the first throughout, the business has a trend rather than a season and the facility conversation should reflect that.
It takes an hour with a spreadsheet and it produces the single most useful document a seasonal business can put in front of a lender, which is a picture of its own year with the requirement marked on it.
The conversation with a lender
What a seasonal business should present.
Two years of monthly closing balances on one line, with the trough and the pre-season build marked, is the single most persuasive document a seasonal business can put in front of a lender. It shows the pattern, the depth and the timing without any argument being made, and it demonstrates that the business understands its own year.
Alongside it, the peak requirement calculated rather than estimated, and a statement of when the facility is expected to clear. A lender that can see a predicted pattern and then watch it happen has a far easier review conversation twelve months later.
What that presentation is really doing is removing the lender’s uncertainty about seasonality, which is otherwise the thing that makes a seasonal file harder than a steady one. A business that names its trough before being asked about it is treating the pattern as ordinary, which is what it is.
The cost of the drawdown
What carrying the seasonal balance costs.
A revolving facility charges on what is drawn, so this shows the interest cost of an average drawn balance across the year rather than a repayment. Indicative only, and not a quote or offer of credit.
Indicative interest cost
Weekly
$213/week
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $180,000 scenario
$85,000 drawn at 13.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
References
Sources
- Stats NZ
Context for the seasonal patterns in New Zealand tourism, retail and construction activity.
- Reserve Bank of New Zealand, statistics
Context for why indicative rate bands move over time rather than being fixed figures.
- Inland Revenue, provisional tax
Relevant because tax instalment dates rarely align with a seasonal trading pattern.
- Commerce Commission
The regulator whose guidance covers lender conduct, including facility reviews.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
Smoothing seasonal cash flow, questions answered
When is a seasonal facility deepest?
At the pre-season build rather than in the trough, because stock, staffing and marketing are paid for before any revenue resumes. A limit sized only on the quiet months runs out at exactly that point.
How should a seasonal limit be sized?
On the peak requirement, which is the accumulated shortfall through the quiet months plus the pre-season build. Last year’s bank statements give both figures more honestly than a forecast built forward.
When should a seasonal facility be arranged?
During the peak, for use in the following trough. A lender assessing the business at its strongest is looking at a different picture from one assessing it at its weakest, and the terms differ accordingly.
What is the floor and why does it matter?
The lowest drawn balance reached in each cycle. Rising across three years, it shows that the peak is no longer clearing the year, which is visible a full year before the limit would be reached.
Should the facility return to zero every year?
Ideally yes. A facility that clears in the peak is revolving as intended. One that stops a little short each year is accumulating permanent debt at a revolving rate, which costs more than a term facility would.
What if the season starts late?
The facility absorbs it, which is one of its genuine advantages. The cost is more interest for the additional weeks, and the risk is the extended drawing meeting a limit sized without tolerance.
Is a term loan ever better for seasonality?
Rarely. A term loan charges interest on the whole amount for the whole year including the peak months when nothing is needed, and it has to be reapplied for the following year.
What does a rising floor call for?
A full-year calculation of revenue against total cost including funding, and then a decision about pricing, the cost base or the shape of the year. A limit increase does not answer it.
Can a lender reduce the limit mid-season?
On the terms in the agreement, yes, and it is most likely where the position has weakened. That is one more reason not to treat a seasonal limit as permanent capital and to know the review terms.
Does the line fee make a larger limit uneconomic?
Rarely. The additional line fee on headroom is ordinarily a few hundred dollars a year, against the cost and disruption of an urgent limit conversation in the worst week of the year.
How far ahead should the build be checked?
Four to six weeks. That is enough time for a limit conversation to happen calmly if the headroom is short, and it is the point at which the size of the build is known rather than estimated.
Is this page financial advice?
No. It describes a usage pattern in general terms. This site is not a lender, a broker or a registered financial adviser, and what suits a particular business depends on facts a website cannot see.
Related
Related reading
Business line of credit
The facility this pattern is built around.
Read onFunding a stock cycle
The shorter, repeating version of the same curve.
Read onWhat lenders assess
Why timing an application matters so much here.
Read onHow a line of credit works
The mechanics underneath the pattern.
Read onAll eight facilities
Every revolving arrangement compared in the same shape.
Read on