Financing seasonal demand

This paper identifies seasonal firms and their peak seasons to provide empirical evidence of the approach these firms take to finance seasonal operations. The seasonal use of funds, which builds before seasonal revenue, is largely financed with transitory sources of credit, such as credit lines, trade credit, and commercial paper. Permanent financing is used only moderately to meet seasonal needs. However, both weak credit market conditions and firm‐level financial constraints limit the ability of seasonal firms to use debt as transitory financing. These frictions result in a partial shift to permanent financing but reduce the seasonal use of funds overall.