DEFINITION of 'Seasonal Credit'

Seasonal credit is any type of credit arrangement that permits corporate borrowers to consistently pay their overhead and other expenses despite seasonal components of revenue generation. Seasonal credit is usually presented as a line of credit and then becomes classified as revolving credit.

Seasonal credit can also refer to a type of credit offered by the Federal Reserve discount window that can last for up to nine months. For example, as of May 2018, the Federal Reserve of Chicago offered 1.95 as its lending rate for season credit. 

BREAKING DOWN 'Seasonal Credit'

Seasonal credit is offered to firms that experience seasonal swings in their cash flow. This allows them to continue operating smoothly during months when there may be little or no income. 

The Federal Reserve states that "under the primary credit program, loans are extended for a very short term (usually overnight) to depository institutions in generally sound financial condition. Depository institutions that are not eligible for primary credit may apply for secondary credit to meet short-term liquidity needs or to resolve severe financial difficulties. Seasonal credit is extended to relatively small depository institutions that have recurring intra-year fluctuations in funding needs, such as banks in agricultural or seasonal resort communities."

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