A repayment of $1,200 a month is the same number in January as it is in March. What changes is the work coming in behind it. For a lot of tradies and small business owners, that is the whole problem: the loan is fixed, the income is not.
This post is general information only, and the figures are illustrative examples, not a forecast.
Draw the year, not the month
Most owners know roughly what a good month looks like. Fewer have written down what a bad one looks like. Take a sheet of paper (graph paper is ideal) and mark twelve columns. For each month, jot down three things:
- Money in, including what you were actually paid, not what you invoiced.
- Money out that does not change: repayments, insurance, vehicle costs, software.
- Money out that lumps: BAS, registration, annual servicing, tax instalments.
You will usually see a shape. A landscaper may find winter thin. A builder who relies on school-holiday shutdowns may find December and January strange. A hospitality fitout contractor may be flat in the weeks before Christmas and then flooded in February.
Find the thinnest month
Once you have the shape, find the weakest month and ask one question: if that month happened twice in a row, could I still make every repayment on time?
If the answer is yes, you have headroom. If it is no, you have identified the exposure before it became a late fee or an uncomfortable phone call with a lender.
Illustrative example: a repayment of $1,200 against takings of $14,000 in a strong month is under 9%. The same repayment against $5,500 in a weak month is nearly 22%. The loan did not change. The proportion did.
Why timing matters as much as size
Two businesses can have the same repayment and very different experiences. The difference is often timing. If a repayment lands on the 1st and your largest client pays on the 28th, you are always funding the gap yourself. Some lenders allow a choice of repayment date or frequency, though the options, costs and rules vary. It is worth asking, not assuming.
Options owners commonly explore
None of these is right for everyone, and each has a cost:
- Build a buffer. Setting aside a fixed amount in good months to cover weak ones. It is slow, but it has no fees.
- Ask about repayment dates. Aligning the date to your usual cash arrival.
- Review the term. A longer term usually lowers each repayment but can raise the total interest paid.
- Review the structure. Some finance types allow different repayment shapes. Read the fine print and check the comparison rate and fees.
If you would like to see what structures might exist for your situation, you can start a free, no-obligation enquiry. It is general information on this site, not personal advice, and any outcome is subject to lender criteria and approval.
Don't forget the lumps
Quiet months are only half of it. A heavy BAS quarter can hit at the same time as a slow patch. The ATO has information for small businesses on ato.gov.au, and your accountant can help you plan for the payments you can see coming.
A five-minute action
Pick one number: your repayment divided by your worst month's takings from last year. Write it on the first page of your diary. If it climbs past a level that makes you uneasy, that is your cue to start the conversation with your accountant or lender while you still have choices.
For independent information about budgeting and borrowing, ASIC MoneySmart has free tools and guides. They are not specific to equipment, but the budgeting basics apply.
Quiet months are normal. Being surprised by them is optional.
