Use case

Cash-flow gaps funding: how to size it and what to watch.

A cash-flow gap is the time between paying costs and collecting revenue, and it is the most common funding need of all.

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What this looks like

A cash-flow gap is the time between paying costs and collecting revenue, and it is the most common funding need of all.

Slow-paying customers, a long production cycle or a pending government payment all create gaps. They are not signs of failure; they are structural features of the business.

How to size it

Quantify the gap: the number of days between paying out and collecting, times the average daily outflow. A request equal to that figure plus a small buffer is sensible.

Illustrative arithmetic

A B2B services firm depositing about $95,000 a month asks for $35,000 to bridge 45-day invoice terms. At a 1.22 factor the payback is $42,700, a cost of $7,700. Over roughly 6 months that is about $339 per business day, or close to 7% of monthly deposits.

Total payback: $42,700.
Cost: $7,700.
Payment: about $339 per business day, close to 7% of monthly deposits.

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

Which structure tends to fit

A flexible structure that eases when collections catch up is preferable to a fixed payment that continues regardless.

Where it goes wrong

Treating a recurring gap as a one-off
Not addressing the root cause such as payment terms
Over-sizing and paying for idle cash

Before you apply

Calculate days sales outstanding
Negotiate shorter terms or deposits where possible
Match the repayment to when collections arrive

Typical starting points

Monthly revenueTypically from around $20,000 a month in deposits for Canadian files. The exact line varies by funder and by file.

Time in businessTypically about 12 months. Newer businesses can be reviewed, but the options narrow.

Account healthLimited low-balance or negative days. Funders read the last few months of bank statements for this.

CreditScores from 500 are considered. A score of 600 or higher opens more options and better offers.

DocumentsA signed application and recent business bank statements, typically the last four months.

Existing advancesFiles with an existing advance can be reviewed, including second position.

Common questions

How much should I ask for?

Ask for the amount you can name in dollars and tie to a quote, invoice or schedule. A smaller, specific request is easier to approve and cheaper to repay.

Which structure is best?

It depends on whether the need is a one-time purchase or a recurring gap. See the comparison pages for the trade-offs.

How fast can I get it?

Decisions are often the same day on a complete file, and funding can follow the next business day.

Keep reading

Funding use casesPayroll, inventory, expansion and more Merchant cash advance CanadaHow an advance against future card sales works Revenue-based financing CanadaRepay a fixed multiple as a share of revenue Cash-flow affordability calculatorCan the month carry the payment?Underwriting situationsCredit, NSFs, time in business and more

Educational information only. It is not legal, tax or accounting advice.

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