Glossary
How fast a business spends cash beyond what it earns.
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Short answer: Burn rate is how fast a business spends cash beyond what it earns, measured as monthly outflow minus inflow. A company spending $40,000 a month with $25,000 in revenue burns $15,000 a month. A business with positive cash flow has no burn; seasonal businesses may burn only in the off-season.
Key facts
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How fast a business spends cash beyond what it earns.
Burn rate is cash outflow minus inflow over a month. A business with positive cash flow has no burn.
It shows how long cash lasts.
A startup spending $40,000 a month with $25,000 in revenue burns $15,000 a month.
Applies to startups and seasonal businesses in their off-season.
Reviewers look for deposits that cover payments. A business burning cash every month without a clear end is a poor fit for short-term funding.
A seasonal burn is normal and planned. A permanent burn is a business-model question, not a funding question.
Runway is cash on hand divided by monthly burn. A business with $60,000 in the bank burning $15,000 a month has four months to reach break-even or raise more capital.
Seasonal businesses burn in the off-season and recover in peak months. Planning the off-season burn in advance, with a reserve or a facility arranged during strong months, is very different from discovering it in February.
Short-term funding fits a burn with a clear, near end, such as a season starting or a contract beginning. For a burn without a clear end, the questions are about pricing, costs and the business model. Funding alone delays the answer and adds cost.
A Montreal software start-up with $120,000 in the bank and $20,000 a month in net burn has six months of runway. If revenue is growing toward break-even within four months, a short facility may cover the final stretch safely. If revenue is flat, the start-up needs to cut costs or raise equity, because short-term funding would only add a payment to a business that is not yet earning enough to carry it.
Key takeaway: Short-term funding suits a burn with a clear end. A burn without one is a question about the business model, not about funding.
Recalculate burn and runway monthly. A runway that shrinks faster than planned is an early warning that gives you time to act before the bank balance forces the decision.
Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.
It can bridge a seasonal or short burn with a clear end. It is not built for long burns.
See the related guides and the comparison pages, or apply and ask.
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Educational information only. It is not legal, tax or accounting advice.
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