Glossary
Revenue minus the direct cost of goods or services, as a percentage of revenue.
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Short answer: Gross margin is revenue minus the direct cost of goods or services, expressed as a percentage of revenue. A restaurant with $50,000 in sales and $17,000 in food costs has a 66% gross margin. It shows how much of each sale is left for overhead and debt, so it decides how large a payment the business can carry.
Key facts
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Revenue minus the direct cost of goods or services, as a percentage of revenue.
It shows how much of each sale is left to pay overhead and debt. Higher margins can carry larger payments.
It determines how much of a payment the business can carry.
A restaurant with $50,000 in sales and $17,000 in food costs has a gross margin of 66%.
Margins vary widely: groceries are thin, services can be high.
A deposit review sees revenue; owners know margin. Telling a reviewer your margin helps explain why a payment fits.
A share-of-sales payment of 8% in a business with a 6% net margin takes more than the profit. Size against margin, not revenue.
Monthly gross profit is revenue minus direct costs. From that, subtract fixed overhead to find what remains each month. A new payment should fit comfortably inside what remains, with room left for a slow month.
If a business has $80,000 in monthly sales, a 40% gross margin and $24,000 in overhead, about $8,000 remains. A payment of $2,000 a month fits; a payment of $7,000 would leave almost nothing for surprises.
Margins change with input costs, pricing and product mix. Reviewing them quarterly, especially before taking on new payments, keeps funding decisions grounded in what the business actually keeps rather than what it sells.
An Ottawa café sells a latte for $5.50 with about $1.40 in direct costs, a gross margin near 75%. A sandwich at $11 costs $5.50 to make, 50%. If the café's sales mix shifts toward sandwiches, overall margin falls even though revenue rises. A reviewer sees revenue on the statements; the owner who knows margin by item can explain why a payment fits and which products should carry growth.
Key takeaway: Size every new payment against what the business keeps after direct costs and overhead, never against revenue alone.
Margins also explain to a reviewer why two businesses with the same deposits can carry very different payments. Sharing yours turns a revenue figure into a clearer picture of capacity.
Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.
It affects how much payment the business can comfortably carry.
See the related guides and the comparison pages, or apply and ask.
No. It is educational information, and agreements vary.
Educational information only. It is not legal, tax or accounting advice.
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