Cash flow
Cash-flow gaps: why profitable businesses run short, and how to bridge them
Credible Lending Editorial · Updated · 4 min read
The short answer
A cash-flow gap happens when money leaves the business before money comes in, even if the business is profitable. It's usually caused by slow-paying customers, inventory bought ahead of sales or seasonal swings. The fix is to shorten the gap, or to cover it with flexible financing like a line of credit.
It's one of the most frustrating moments in business: the P&L says you're profitable, and the bank balance says you can't make Friday's payroll. The problem isn't the business. It's timing.
Where do cash-flow gaps come from?
- Customers on net-30, net-60 or net-90 terms.
- Inventory purchased weeks or months before it sells.
- Seasonal revenue with year-round fixed costs.
- Growth itself: new hires and bigger orders cost money before they make it.
Five ways to bridge the gap
- Invoice promptly and offer a small discount for early payment.
- Negotiate longer terms with your largest suppliers.
- Forecast 13 weeks ahead so gaps are visible before they arrive.
- Use invoice financing to turn open receivables into cash now.
- Hold a line of credit you only draw when the forecast says you need it.
The last one is the safety net. An unused line of credit costs little, and when you do draw, you pay interest only on what you use and the credit restores as you repay.