# Working capital — what it means for tradie cashflow > Working capital is the everyday cash a tradie needs for materials, wages and fuel while waiting to get paid — why trades run short, and how to fund the gap. Source: https://tradiefinance.co.nz/glossary/working-capital Published: 2026-05-15T08:00:00.000Z Category: cashflow Tags: glossary, cashflow Image: https://tradiefinance.co.nz/images/resources/generated/tradie/glossary/working-capital-primary.jpg Image alt: Invoices, materials and a tablet representing Working capital — what it means for tradie cashflow --- Every tradie has lived this one. The job is finished, the client is happy, the invoice is sent — and your bank balance is still flat because you fronted the materials weeks ago and they pay on the 20th of next month. That gap is what working capital is all about. ## What it is **Working capital** is the everyday cash your business needs to keep running between money going out and money coming in. It covers the costs you carry before a job pays you back: timber and fixings, fuel, a subbie's wages, the gear hire, the GST you'll owe. In accounting terms it's your current assets (cash, money owed to you, stock on the truck) minus your current bills (what you owe suppliers, wages due, the next tax payment). If that number is healthy, you can take the next job without sweating payday. If it's tight, one slow-paying client can leave you short even when the business is genuinely profitable on paper. ## Why trades are working-capital hungry Trades feel the squeeze harder than most small businesses, for two simple reasons. **You front the costs.** On a lot of jobs you buy the materials before you've seen a cent. A re-roof, a bathroom fit-out, a switchboard upgrade — you might be thousands of dollars out of pocket on supplies and labour before the first progress claim goes out. **You get paid late.** Then you wait. Residential clients drag the chain, builders pay you on their cycle (often 30 to 60 days after you invoice), and you're stuck carrying the cost in the meantime. The work is done and earning nothing while the cash sits on someone else's books. Add a busy patch — three jobs running at once — and the gap multiplies. Growth actually makes it worse, not better, because every new job needs cash up front before it pays out. That's the trap: you're flat out, the work is good, and you still can't make the numbers stretch to Friday. ## How to fund a gap vs fix a structural shortfall Here's the bit that matters most. Not every cash crunch is the same problem, and the right fix depends on which one you've got — borrowing fixes one of them and quietly makes the other worse. A **timing gap** is a one-off or seasonal stretch — a big materials buy, a client who's slow this month, a quiet winter. The cash is coming; you just need to bridge the wait. A flexible facility suits this: a [business overdraft](/glossary/business-overdraft) you dip into and clear, or [invoice finance](/glossary/invoice-finance) that advances most of an unpaid invoice so you get paid now instead of in 60 days. You pay for what you use and pay it down when the money lands. A **structural shortfall** is different — you're short every single month, no matter how the jobs land. That's not a financing problem you borrow your way out of; borrowing just delays it. The usual causes are pricing that's too thin, deposits you're not asking for, GST and tax money you've spent, or terms that let clients pay whenever they like. The fix is in how the business runs: charge a deposit, invoice the day you finish, set clear payment terms, and put tax money aside as it comes in. Short-term finance is a brilliant tool for smoothing the lumpy gap between doing the work and getting paid. It's a terrible plaster for a business that loses money on every job. Run the numbers with your accountant first — if the work is profitable and the problem is the wait, finance fits. If it isn't, fix the pricing. We see this every week, and we can help you match the facility to the gap — an overdraft for the day-to-day wobble, invoice finance for the slow-paying clients — and keep it in proportion so you're not paying to borrow money you don't actually need. We're a broker, not a lender, so we shop the deal across our panel rather than selling you our own product. ## See also - [Business overdraft](/glossary/business-overdraft) - [Invoice finance](/glossary/invoice-finance) - [The tradie cashflow finance guide](/guides/tradie-cashflow-finance-guide) Not sure whether your crunch is a timing gap or something deeper? Have a no-pressure chat with a team that gets how trade businesses actually run — [book a call](/book-a-call) and we'll talk it through, or [browse our help centre](/help) if you'd rather read first.