Finance for covering a cash flow gap

Most cash flow gaps aren’t emergencies. They’re arithmetic. You pay staff fortnightly, suppliers on 14 days and rent on the first of the month, while your customers pay on 30, 45 or “when the accounts team gets to it”. The business makes money over a year, but on a Tuesday in the middle of the month the bank balance says otherwise.

Finance is very good at fixing that kind of timing problem. It’s very bad at fixing a profit problem dressed up as one. So this page starts with the measuring, then the matching, then the money.

Why do profitable businesses run short?

Three things pull cash out ahead of income, and most businesses have at least two of them:

• Customers paying on terms. The Payment Times Reporting Regulator found that in the first half of 2025, large businesses took an average of 64 days to settle 95% of invoices from small suppliers, compared with 58 days in the previous period. When your largest account is a large company, plan for the slow end, not the stated terms.
• Stock or work in progress. A retailer buys stock months before Christmas. A manufacturer pays for materials, labour and electricity well before anything leaves the dock.
• Lumpy outgoings. Quarterly BAS, annual insurance, a super deadline or a big equipment service land in a single week.

Growth makes all three worse. Every extra dollar of sales on 30-day terms needs extra working capital in front of it, which is why fast-growing businesses are so often the ones that run out of cash. The working capital cycle is the name for that loop from paying out to getting paid.

How big is your gap, in days and dollars?

Lenders respond far better to a measured figure than to “we need about $100k”. Work it out in four steps.

1. Count the days. Add the days stock sits before it sells to the days customers take to pay, then subtract the days you take to pay suppliers. That’s your cash conversion period.
2. Find your daily outgoings. Take a normal month’s cost of sales and overheads and divide by 30.
3. Multiply. Days times daily outgoings gives the base gap.
4. Add a buffer. Because large customers often pay later than terms, add a margin for slippage, plus anything lumpy due in the window, such as a BAS payment.

Our cash flow gap calculator does the first three steps from your revenue, cost of goods and the three sets of days. It’s worth running twice: once with the terms on your invoices and once with the days customers actually take.

Repeating gap or one-off gap?

Here’s the question that decides which finance fits, and it’s the one most owners skip.

A repeating gap comes back every month, quarter or season. It’s built into how the business trades. You want a facility you can draw, repay and draw again without reapplying, and you want to pay only for the days you use it.

A one-off gap has a clear cause and a clear end: a single customer paying 60 days late, a large order you’re fulfilling once, a lull while a contract transitions. A fixed loan sized to that event, with a term that matches its end date, is often cleaner than a revolving limit you’ll be tempted to keep using.

Option	Best for	How it’s sized	Security	Things to check
Bank overdraft	Repeating gaps in an established business	Financials, banking history	Often property or a GSA	Approval can take weeks; limits are reviewed
Business line of credit	Repeating gaps where speed matters	Turnover and bank statements	Often unsecured with a director guarantee	Line fees even when undrawn; draw minimums
Invoice finance	Gaps caused by slow-paying business customers	A share of approved invoices	The invoices themselves	Concentration limits on one big debtor; service fees
Short-term business loan	One-off gaps with a known end	Turnover and the specific need	Usually unsecured	Fixed repayments start immediately, often weekly
Secured line of credit	Larger or long-running working capital needs	Property equity and cash flow	Residential or commercial property	Valuation and legal costs up front
Supplier terms or an ATO payment plan	Easing the outflow side	Negotiated	None	Costs vary; terms can be withdrawn

Banks remain a great first stop for a repeating gap. An overdraft or secured line from your own bank, if you fit, is often the lowest-cost money available, so ask early and ask properly. If the bank can’t help in time, won’t extend the limit or wants security you don’t have, non-bank lenders cover most of the table above.

Already worked out your number? Pop the gap figure into our short form. Sixty-odd seconds of typing, no credit enquiry lodged, and a lending specialist comes back with the facility type that suits it.

What does covering a gap cost?

Cash flow facilities are priced in several pieces, and the headline figure rarely tells the whole story. Expect some mix of:

• a set-up charge, sometimes called an establishment fee;
• interest or a fixed fee on what you draw;
• a line fee charged on the whole approved limit, whether you touch it or not;
• for invoice finance, a service fee as a share of invoices funded;
• early repayment terms on fixed short-term loans, which can mean you save little by paying off early.

Put one question to every lender: what is the all-in dollar cost if you use the facility the way you expect to. For a revolving facility, that means modelling an average drawn balance across a year, not just the limit. The loan cost comparison calculator helps line offers up side by side.

A useful sense check: compare the total cost of covering the gap with what the gap costs if you don’t cover it. Missed early-payment discounts, a supplier who puts you on cash-on-delivery, penalties on a late BAS, or a contract you can’t take on are all real costs too.

Worked example: a joinery shop with a 52-day gap

This is an illustration only. A commercial joinery business in Geelong turns over $2.4m a year. Direct costs (timber, board, hardware and production wages) are about 60% of revenue.

Input	Days
Materials and work in progress before invoicing	25
Builders actually take to pay	48
Less: days the business takes to pay suppliers	(21)
Cash conversion period	52

Daily direct costs are roughly $2.4m × 60% ÷ 365, or about $3,950. Over 52 days, that’s a base gap of around $205k. The owner adds the quarterly BAS that falls in the window and a buffer for one builder who routinely pays at 70 days, bringing the working figure to about $250k.

Because the gap repeats with every job, a revolving facility fits better than a lump sum. The owner’s bank offers a smaller overdraft than needed. The business ends up with a modest bank overdraft for everyday swings plus invoice finance on its larger builder accounts, which grows automatically as the order book grows. Total cost is driven by how much is drawn and for how long, so the owner reviews the drawn balance every month and pays it down when a big claim lands.

Mistakes that make a gap wider

• Funding a loss. If margins don’t cover overheads, borrowing just postpones the shortfall and makes it bigger. Fix pricing or costs first; the break-even calculator shows where you stand.
• Mismatching the term. Taking three years of debt to plug six weeks of timing leaves you servicing a loan for months after the problem has gone.
• Stacking daily-repayment loans. Borrowing from a second online lender to meet repayments to the first quickly turns a timing gap into a debt problem.
• Waiting until the week it bites. A facility arranged in a calm month costs less and comes with more choice than one arranged the day before payroll.
• Ignoring the inflow side. Tighter invoicing, deposits on large jobs and following up overdue accounts can shrink the gap before you borrow a dollar. The government’s business.gov.au guidance on payment terms, listed in the sources below, is a sensible place to start.

Let’s size your gap properly

Most owners who come to us with a cash flow gap aren’t in trouble at all. They’re trading well, often growing, and simply tired of juggling which bill gets paid this week. The right facility turns that juggling into a routine.

Our form is short, roughly sixty seconds of work, and submitting it leaves your credit history exactly as it was. What you tell us is handled in-house; it isn’t parcelled out to a dozen finance companies who then chase you for a week. One of our specialists looks over your figures personally and phones to discuss them. Give us honest numbers for turnover, customer payment habits and the size of the hole, because accurate answers are what let us match the right facility on that first conversation.

Find out how to cover my cash flow gap →