Financial Glossary
Funding Gap
A funding gap is the difference between the total capital a business needs to reach its next milestone and the capital it currently has available from cash, revenue, and committed financing. It is most often calculated by projecting future cash outflows against expected inflows and identifying the point where the balance turns negative. Closing the gap requires raising capital, increasing revenue, cutting spend, or some combination.
Problem & Application
Startups hit funding gaps between rounds, but so do seasonal operators like campgrounds and STR hosts whose costs run year-round while revenue clusters in peak months. Spotting the gap early, through a cash projection that shows the month the account would run dry, gives owners time to arrange a line of credit or adjust spend rather than scrambling when cash is already tight.
In Short
A funding gap is a forecasting problem before it is a financing problem, so the businesses that model it early have the most options to close it. Run the projection before the shortfall arrives.