Working Capital Gap Calculator
Gap = order value × total cost ratio − cash on hand
Enter your numbers to see what the order really needs.
TL;DR Working capital gap = order value × total cost ratio − cash on hand A $1,000,000 retail PO at a 78% all-in cost ratio needs $780,000 of cash; with $300,000 on hand the gap is $480,000.
Cash needed
$780,000
Working capital gap
$480,000
The formula
Cash needed = PO value × (production % + freight & duty %) ÷ 100 · Gap = cash needed − cash on hand (min 0)
Worked example
A food and beverage brand lands a $1,000,000 purchase order. Production runs 70% of the order value and freight and duty add 8%, so cash needed = $1,000,000 × 78% = $780,000. With $300,000 available for the order, the working capital gap is $780,000 − $300,000 = $480,000 that has to be financed before the retailer pays.
Typical all-in cost ratios by category (indicative, as of Q3 2026)
| Category | Typical all-in cost ratio |
|---|---|
| Food & beverage | 60% – 75% |
| Supplements | 50% – 65% |
| Household & personal care | 55% – 70% |
| Electronics & accessories | 70% – 85% |
| Apparel | 55% – 70% |
Ratios are indicative and vary by product, supplier terms, and shipping lanes. For preliminary planning only; not an offer of credit.
Frequently asked questions
What is a working capital gap?
It is the cash you need to fulfill an order minus the cash you have. To ship a $1,000,000 purchase order with a 78% all-in cost ratio you need $780,000 up front; with $300,000 on hand, the gap is $480,000 that has to come from somewhere else.
Why do big purchase orders create cash crunches?
Because production is paid months before the retailer pays. Suppliers often want deposits and payment at shipment, freight and duty come due in transit, and the retailer pays 30 to 90 days after delivery. The bigger the order, the bigger the cash you front in the meantime.
How do brands close the working capital gap?
The common routes are PO financing against the confirmed order, production financing, factoring the receivable once the goods ship, or raising equity. Debt options keep ownership intact and scale with the order, while equity is permanent and dilutive but has no repayment date.
How much of the gap does PO financing typically cover?
For confirmed orders from creditworthy retailers, PO financing often covers up to 100% of the cost of goods, sometimes including freight and duty. The lender pays the supplier directly and is repaid when the retailer pays, so the brand fronts little or no cash.