Know the Figures

Seasonal Cash Gap

A seasonal business needs funding for its worst month, not its average one.

Replaces: Bank facility sizing conversations

How to use it

Spread annual revenue across the year using a seasonal curve, then apply the timing of the money: customers pay after they buy, and stock is paid for before they do. The result is where the cash actually runs out, which is rarely the quietest trading month.

Where the number comes from

  • Monthly revenue follows a cosine curve peaking in the month you choose, scaled so the twelve months sum to the annual figure.
  • Cash in each month is the revenue from however many months earlier customers take to pay.
  • Stock is bought ahead of the sales it supports, so the variable cost of a future month is paid in the current one.
  • Fixed costs are charged every month regardless of trading.
  • The lowest closing balance across the year is the funding requirement — a facility sized below it fails.

What goes wrong

The part most calculators leave out.

  • The cosine curve is smooth and real seasonality is not. A business with one trade show or a single Christmas week has a spike this cannot represent; enter your own month-by-month figures if the shape matters.
  • The trough is driven by timing assumptions more than by trading. Getting the stock lead time or collection lag wrong by a month moves the answer substantially.
  • Seasonal businesses often get seasonal payment terms too — suppliers who allow longer credit in the quiet months change the picture and are not modelled here.
  • A facility that exists is not a facility you can draw. Covenants, borrowing-base tests and annual clean-down requirements frequently bite exactly when seasonal businesses need the money.
  • One bad season does not just cost that year. Entering the next buying cycle without cash forces under-buying, which caps the following peak.

Paying for Christmas in September

A retailer turning over 4.8m with a strong December looks comfortable on paper: 400,000 of average monthly sales against 145,000 of fixed costs. But stock for the peak is bought two months ahead and customers pay a month in arrears. So the business pays for its biggest month in October, collects for it in January, and carries fixed costs throughout. The cash trough lands in the autumn, months before the quiet trading period anyone would have worried about. A facility sized on average trading is sized for a business that does not exist.

Questions

Why is my cash lowest before my quiet season?
Because you pay for the peak before you sell it. Stock purchasing runs ahead of sales and collections run behind them, so the squeeze arrives while trading still looks strong.
How should I size a seasonal facility?
Against the worst month with a margin on top, not against the average. Then check whether the facility permits drawing at that point — many require periodic repayment to zero, which is incompatible with a genuine seasonal cycle.
Does anything I type get sent anywhere?
No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.

Last updated .

Put this calculator on your site

Free to embed, on any site, commercial or not. No sign-up and no tracking script — the calculator runs in your reader’s browser exactly as it does here. All we ask is that you keep the credit line.

HTML

The small script resizes the frame as the reader changes inputs. Drop it if your CMS strips scripts — the calculator still works, it will just stay at a fixed height.

Related calculators