Funding Gap

A clinic expansion has a $5 million approved cost estimate and $3 million in usable committed funds, so the simple headline gap is $2 million. The real financing need may differ once payment dates, reserves and operating cash are mapped.

ACCA's cash-budget guidance shows how the timing of receipts and payments affects available balances, and GAO's cost guide stresses reliable estimates for planning, which together show why a gap calculation needs both credible cost and dated funding information. Start by defining the plan, since a capital project, one operating year and a single payroll date are different scopes and you must state which need is being measured.

Estimate full costs, including direct work, setup, tax where applicable, financing charges and a cash buffer, because missing items make the gap look smaller. Then set a time horizon, as a project can have enough total funding yet run short before a grant pays, and a dated cash schedule exposes the peak need.

Count only usable cash, excluding restricted deposits and funds committed to other obligations, because a bank balance is not automatically project finance. Separate committed from hoped-for funding: a signed drawable credit facility differs from a lender conversation, a facility subject to collateral, documentation or approval is not fully available until the requirements are met, and an investor's expression of interest is not paid-in capital.

An awarded grant may reimburse costs after they are paid, which can reduce the ultimate net cost while leaving an interim funding gap. New sites may buy supplies and pay wages before customer receipts arrive, so include working capital and ramp-up needs beyond construction costs.

Delay, cost escalation, late collections or a contractor overrun can raise cash needs, so document the risk method rather than adding an arbitrary percentage, and show the earliest date and maximum size of the downside. Avoid double counting a loan already included in the bank balance as an unused facility, reconcile sources and uses, and use a consistent currency because foreign costs and finance introduce conversion risk.

Borrowing closes an initial gap but creates later interest and principal payments, so test whether cash flow can support them. More equity dilutes ownership, borrowing adds obligations and scaling back may reduce expected return, so no source is free.

Review lender restrictions, because some financing can only pay eligible project costs and not payroll or taxes, confirm the amount and transfer timing of any promised owner contribution rather than assuming business access to personal funds, and consider deferring a later phase while completing a viable first phase if contractual and operational dependencies allow. Signing a non-cancellable construction contract while the gap remains open can create liabilities, so sequence approvals and funding decisions.

A temporary timing gap may coexist with profitable operations, although repeated gaps may signal a flawed model. For owners, a funding gap is a decision signal showing how much is missing, when, for what and whether the replacement funding is truly available; update it at milestones, give the board or lenders a clear forecast rather than presenting an unapproved plan as settled, and state the amount, deadline, possible source, fallback and action owners, since a number without owners is not a plan.