Quick answer
Fast growth uses cash because you pay for stock, staff and GST before customers pay you. The amount tied up rises in step with sales, so a busier business can be shorter of money than a quieter one. Work out the gap from your debtor, stock and supplier days, then match it with funding that scales: invoice finance or a line of credit for the cycle, and term or equipment finance for one-off purchases.
Key points
- Every extra dollar of annual sales locks up cash for as many days as your working capital cycle runs
- Banks lend on last year's accounts, so a business that has doubled since lodging its return often looks smaller than it is
- Funding that rises with your sales (invoice finance, a line of credit) usually suits growth better than one lump-sum loan
- Big customers often pay slowly: large businesses took 64 days to pay 95% of their small business invoices in early 2025
- Shrinking margins, ATO arrears and stretched suppliers are the signs growth has turned into overtrading
Orders are up, the team is flat out and the sales report looks better every month. Yet the account balance keeps falling, the BAS is due, and you’re juggling which supplier to pay this week. None of this means you’ve mismanaged anything. It’s the most common cash problem in a healthy business, and it has a name: growth eating your working capital.
The good news is that this gap can be measured. Once you know its size and shape, you can fund it properly instead of patching it with credit cards and late payments.
Why does growth drain cash?
Every sale you make sets off a chain of payments that runs in the wrong order. You buy stock or materials, pay wages to do the work, deliver, issue an invoice, and then wait. In many cases you also owe the GST on that invoice before the customer has paid it, when your BAS is prepared on a non-cash (accruals) basis.
When sales are flat, last month’s receipts roughly pay for this month’s costs. When sales climb, this month’s costs belong to a bigger business than last month’s receipts did. The shortfall grows with every step up in turnover.
Three numbers decide how much cash is locked up:
| Measure | What it tells you | Effect on cash when it rises |
|---|---|---|
| Debtor days | Average wait between invoice and payment | More cash waiting in unpaid invoices |
| Stock days | How long goods sit before they’re sold | More cash sitting on shelves |
| Creditor days | Average time before you settle supplier bills | Less cash needed (suppliers fund you) |
Debtor days plus stock days, minus creditor days, gives your working capital cycle. A rough rule: extra annual sales × cycle days ÷ 365 approximates the extra cash your growth will absorb.
Slow payers deepen the hole. In its January 2026 update, covering the first half of 2025, the federal payment times regulator reported that big companies were averaging 64 days to clear 95% of what they owed small suppliers, compared with 58 days in the prior cycle. Landing a big-name customer can stretch your debtor days at exactly the wrong moment.
How do lenders see a fast-growing business?
Lenders like growth. They’re also wary of it, because a business that has outgrown its funding can fall over while still profitable. What they actually check:
- How recent your numbers are. Banks lean on lodged tax returns and annual accounts. If turnover has jumped 50% since June, those documents undersell you. Interim profit and loss figures, the latest BAS and an aged debtors report close that gap.
- Bank statement behaviour. Rising deposits help. Dishonoured payments, regular overdrawn days and ATO payment plans suggest the growth is already outrunning the cash.
- Margin. If revenue is up but gross profit as a percentage is falling, a lender will ask whether you’re buying growth with discounts or rush freight.
- Customer concentration. One customer making up most of the new sales is a risk lenders price in.
- A forecast that adds up. A 13-week cash flow forecast showing when the gap peaks and when it closes carries real weight.
Which funding fits growth?
Start with your bank. If the business has a solid history and you can show current numbers, a bank overdraft increase or term loan is usually the lowest-cost option, and the relationship is worth keeping. Ask early, before cash is tight, and bring recent figures rather than last year’s return.
If the bank can only offer a limit sized on old accounts, or says no, these options are ranked roughly by how well they suit a growing business:
- Invoice finance. You draw against unpaid invoices, so available funds rise as sales do. Best for businesses that bill other businesses on terms.
- Business line of credit. Draw on it when the cycle bites, pay it back as customers settle. Lenders set unsecured limits by looking at turnover and account history, and the cost mostly tracks what you’ve drawn.
- Working capital loans. A set amount over a short term. Simple and quick, but fixed, so it can be too much early and too little later.
- Equipment finance. For the extra van, oven or machine growth requires. The asset secures itself, which keeps your other limits free for working capital.
- Trade finance. Your supplier gets paid by the funder, local or overseas, so the stock arrives and you repay once it has sold.
- Property-secured funding. Where there’s equity in a home or premises, a secured line of credit opens up bigger limits, and usually a cheaper total bill than going unsecured.
If you’d rather someone sized this for you, tell us how fast you’re growing and what the cash gap looks like.
A worked example
This one is illustrative. An Adelaide food packaging wholesaler turned over $2.4m last financial year and is heading for roughly $3.6m this year, thanks to three new accounts supplying supermarket brands. Debtors average 52 days, inventory turns over in about 40, and the business settles its own bills at 30. Net result: a 62-day cycle.
Extra annual sales of $1.2m × 62 ÷ 365 ≈ $204k of extra cash tied up. The owner had been covering it with a $60k overdraft and by paying suppliers late, and two of those suppliers had moved the business to cash on delivery.
The bank offered an overdraft increase sized on the $2.4m year. Rather than borrow the whole gap as one loan, the owner:
- set up invoice finance over the growing debtor book, which covered most of the gap and expands as sales do
- kept the bank overdraft for day-to-day timing
- put a second delivery van on equipment finance instead of paying cash.
Total finance costs rose by a few thousand dollars a month. In return, suppliers went back onto 30-day terms, which itself freed up cash, and the business could keep saying yes to new orders.
To test your own figures, try the cash flow gap calculator and the working capital ratio calculator.
A step-by-step plan
- Measure the cycle. Work out debtor, stock and creditor days from your accounting software.
- Forecast 13 weeks. List every expected receipt and payment week by week. Find the lowest point.
- Squeeze the cycle first. Shorter invoicing terms, deposits on large orders, quicker follow-up and leaner stock all reduce what you need to borrow. business.gov.au’s cash flow guidance has a useful checklist.
- Talk to your bank with current figures. Bring the forecast, recent BAS and management accounts.
- Match each need to a facility. Revolving funding for the cycle, term or asset finance for one-off purchases.
- Build a buffer. Size the limit for the peak plus a margin for one large customer paying late.
- Review monthly. Growth plans change. Your funding should keep pace.
What mistakes should you avoid?
- Funding working capital with a short-term loan that has daily repayments. It drains the account you’re trying to fill.
- Stacking several online loans. Each one makes the next lender less comfortable, and repayments compound quickly. See refinancing expensive short-term business debt.
- Letting the ATO become the lender. Missed BAS payments create debts that make every later application harder.
- Taking every order. Sometimes the cheapest growth funding is turning down a slow-paying, low-margin customer.
- Borrowing the total sales figure. You need the peak gap, not the turnover.
If one large job is driving the jump, our guide to funding a big contract walks through that scenario in more detail.
Growing faster than your cash? Let’s put the right limit in place
Rapid growth is a good problem, but a problem all the same, and fixing it early keeps it good. The right structure lets you keep accepting work without leaning on suppliers or the tax office.
Sixty-odd seconds is all the form asks of you, and no credit enquiry is run at that stage, so your score is untouched. Nobody forwards it to a long list of funders. A specialist on our team works through it and rings you to discuss the growth plan. Put down honest turnover figures for last year and this year’s run rate: the pair of numbers tells us which facility can stretch with you.
Frequently asked questions
How can my business be profitable and still run out of cash?
Profit is counted when you invoice; cash arrives when the customer pays. In between, you've already paid for materials, wages and often the GST on the sale. When sales are rising, each month's outgoings are bigger than the receipts from the smaller month before, so the gap widens even though every sale makes money.
What is overtrading?
Overtrading is taking on more sales than your working capital can support. Warning signs include paying suppliers later and later, falling behind on BAS, relying on one customer's payment to make payroll, and gross margin slipping because you're buying in a hurry. It's a funding and planning problem, not a sign the business is failing.
Will a bank lend to a business that is growing quickly?
Often, yes, and bank money is usually the cheapest you'll find. The catch is evidence: banks rely heavily on lodged tax returns and financial statements, which may describe a much smaller business. Up-to-date management accounts, BAS and a cash flow forecast help a bank lend against where you are now rather than where you were.
Is invoice finance better than a business loan for growth?
For a growing business-to-business company it's often a better fit, because the limit rises as your debtor book grows and you only use what you need. A term loan suits a defined one-off cost such as a fit-out or new machine. Many growing businesses use both.
How much should I borrow to fund growth?
Enough to cover the peak gap in your forecast plus a buffer, not the total value of new sales. Multiply the extra annual sales by your working capital cycle in days, divide by 365, add any one-off spending, then test it month by month in a 13-week forecast.