What Is Seasonality Adjustment?
Seasonality adjustment refers to recognizing that many businesses experience cyclical revenue patterns tied to holidays, industries, or seasons. For example, a retail store may see spikes in December, while a landscaping business peaks in summer.
In MCA and small business lending, adjusting for seasonality means comparing applicants against their typical cycle rather than treating temporary swings as permanent.
Seasonality adjustment typically appears during financial analysis, where deposit and revenue data are reviewed. Operators use it to avoid misclassifying strong applicants as weak during off-peak periods or overvaluing them during seasonal spikes.
How Does Seasonality Adjustment Work?
Seasonality adjustment works by analyzing deposit trends over time.
- Historical review: Deposits and revenues are compared across multiple months or years.
- Pattern identification: Recurring spikes or dips are flagged as seasonal rather than irregular volatility.
- Adjusted averages: Baseline figures are calculated with seasonality in mind, giving a truer picture of cash flow.
- Decision context: Underwriters use adjusted data to decide if the business is fundable.
In Heron, seasonality adjustment is supported through automated scrubbing and enrichment.
- Statement parsing: Deposits and balances are extracted from bank statements.
- Pattern analysis: Heron highlights recurring cycles in inflows and outflows.
- Contextualization: Revenue swings are marked as seasonal when consistent across time.
- CRM write-back: Adjusted figures and seasonality notes are written into the CRM so underwriters have context before making a decision.
This makes sure seasonal businesses are evaluated fairly without extra manual analysis.
Why Is Seasonality Adjustment Important?
For brokers and funders, seasonality adjustment prevents false negatives and false positives in underwriting. A business may appear weak if reviewed during its off-season, or artificially strong if analyzed during a holiday spike.
By applying seasonality adjustments, Heron ensures deals are judged against true operating performance, not temporary cycles. This improves fairness, accuracy, and confidence in funding decisions.
Common Use Cases
Seasonality adjustment is applied wherever recurring revenue cycles affect risk views.
- Reviewing retail businesses with holiday-driven spikes.
- Evaluating seasonal services like landscaping or tax preparation.
- Adjusting deposit averages to smooth out peaks and valleys.
- Writing adjusted revenue values into CRM fields for underwriting.
- Flagging seasonal patterns for underwriters so they can contextualize swings.
FAQs About Seasonality Adjustment
How does Heron support seasonality adjustment?
Heron parses deposit data across multiple statements and highlights recurring cycles. It writes adjusted figures and context into the CRM so underwriters see the true financial picture.
Why is seasonality adjustment valuable for MCA underwriting?
Without adjustment, seasonal businesses may be wrongly declined during slow months or overvalued during peaks. Adjustments provide fairness and improve decision accuracy.
What outputs should teams expect from seasonality adjustment?
Teams receive adjusted revenue averages, seasonality notes, and structured CRM fields that explain the context of revenue swings.