Merchant Cash Advance for Cash Flow Gaps
When cash flow funding from an advance fixes a timing gap.
Who should read this: owners watching the balance dip between paying out and getting paid.
How do you tell a timing gap from a revenue problem?
You tell them apart by looking at whether money in eventually catches up with money out over a full cycle. A timing gap shows a low point followed by a recovery: the balance drops mid-month and climbs back when a big customer pays. A revenue problem shows a line that trends down month after month, with each low point lower than the last.
When the gap is a payroll date, see Payroll; when it's a stock order, Inventory is the closer match.
On our team we take the daily ending balance from each statement and sketch it out. Three or four months of that line tell us more than the monthly deposit total ever will.
Signs a cash flow file will hold up
A funder looks for recoveries. Specifically:
- Ending balances that rebound after the low days
- Deposits that are regular in size and timing, not one windfall
- How many days the account sat negative, and whether that number is rising
- Whether the gap is being filled by transfers from a personal account
Every funder weighs these in its own way. None of them is a pass-or-fail line on its own.
We're not a funder.
We don't fund deals ourselves. We shop yours with funders who do, so you see more than one offer.
Only funders that fit.
Your file goes to funders that work with your industry and your deal size. Nobody else sees it.
You make the call.
Every offer comes to you in writing. Nothing happens until you pick one.
- What it costs to apply
- Nothing. Applying costs you nothing, and Afterfirst MCA charges you no fee.
- Credit
- Ask us how each funder checks credit before you agree to anything.
- Speed
- We call you back and talk with you before your file goes to any funder.
- Offers
- Every offer shows the total payback, the payment amount, how often it comes out, and the term.
How should the advance be sized against the gap?
Size the advance to the gap, not to the largest offer. If the shortfall between now and the receivable is about $20,000, for example, taking $60,000 means paying a factor on $40,000 the business did not need, and carrying a larger payment. Owners often accept the top number because it's offered. The daily debit that comes with it's the part that lasts.
Most cash flow files are either a first advance, covered in How a merchant cash advance works, or a Second position, and the Reconciliation guide matters if the gap runs longer than planned.
How long cash flow funding should last
Cash flow funding should last about as long as the gap it covers, with a little room for the receivable arriving late. An estimated term far longer than the gap means paying the payment long after the problem is gone.
Counting the days from dip to payment
Measure the gap from the day the balance starts to drop to the day the late receivable is expected. Past statements show how long similar gaps ran.
One customer who pays late every quarter
When one customer pays late every quarter, the gap repeats on a schedule. That pattern can be planned for rather than funded each time.
Closing the gap through the customer instead
Sometimes a conversation about deposits or progress billing with that customer closes the gap without any funding. It costs nothing to ask.
A reserve for a sixty-day client
A contractor whose largest client pays sixty days out might plan a cash reserve for that window. An advance then covers only the quarters when the reserve falls short.
Sizing the reserve from past quarters
Look at how short the account ran in each of the last few late quarters. The largest of those shortfalls is a fair starting size for the reserve.
Timing gap questions
Is a merchant cash advance a good fix for slow-paying customers?
A merchant cash advance can bridge the wait for a slow-paying customer when the invoice is real and due soon. If late payment is routine, invoice factoring or a line of credit may fit the pattern better. Compare the cost of each over the length of the delay.
What if the cash flow gap keeps coming back every month?
A gap that returns every month usually points to margin or pricing rather than timing. An advance adds a fixed payment to that pattern and can make it worse. Look at the cause first, and talk with an accountant if the pattern is new.
Can I take a smaller amount than the funder offers?
Yes, most funders will write a smaller purchase price if you ask. The remittance and total cost shrink with it. Ask before the contract is drawn up.
Sources
- The SBA's Guide to managing business finances points owners to a balance sheet and a cash flow projection for future years, the records that show whether cash flow funding covers a timing gap or a trend.
Afterfirst is not a funder; all offers are subject to funder underwriting.
Cost, credit, speed and stacking
Cost
Credit
Speed
Stacking
Send one file.
See what fits.
Call 877-FUND-654 with questions.