Key points
- Revenue is not cash until it is collected.
- Growth can increase the amount tied up in receivables and inventory.
- Financing should match the length and purpose of the operating cycle.
A simple cash-conversion cycle
- Pay suppliers
- Hold / produce
- Sell
- Wait for collection
- Cash returns
The timing and steps differ by sector, but the question is the same: how long is cash committed before it returns?
Where the cash gap comes from
- Receivables rise because customers take longer to pay.
- Inventory is purchased or produced before it is sold.
- Project costs are incurred before certification, billing or collection.
- Retention sums are withheld until milestones or defects periods end.
- Capital expenditure consumes cash before it contributes earnings.
- Rapid growth increases the working-capital requirement before collections catch up.
Read the cash-conversion cycle in simple terms
Map when the business pays, how long stock or work remains in process, when it invoices and when cash is actually collected. The total gap is the operating cash-conversion period the business must fund.
A permanent level of working capital may require a different structure from a short seasonal peak or a one-off project gap.
Fix the operating question before choosing financing
The first response may include tighter collections, purchasing changes, better billing milestones, inventory discipline, supplier terms, facility restructuring or new financing. The answer is often a combination, not simply a larger limit.
When it may fit
Signals worth exploring
- A working-capital facility that revolves with a repeatable trading cycle.
- Trade or invoice-related structures where the underlying documents and collections support them.
- Term financing for longer-lived assets rather than using short-term working capital.
When it may not fit
Reasons to pause
- Funding recurring losses without a credible recovery plan.
- Using short-tenor capital for a long or uncertain project cycle.
- Adding debt when collection discipline and margin leakage remain unresolved.
Owner checklist
Questions to answer before choosing a route
- Where is cash tied up today?
- How many days pass from payment to collection?
- Is the gap seasonal, project-specific or permanent?
- Which customers, products or projects create the longest cycle?
- What operating change could reduce the funding need?
Discuss the business need
Start with the objective, operating facts and rough numbers.
OUC can help clarify the need, prepare the business case, compare realistic pathways and coordinate an appropriate introduction. Financing, transaction or listing outcomes are not guaranteed.
Official sources and further reading
Rules and provider criteria can change. These links were checked on 2026-08-23.