How to Use Working Capital Lenders to Improve Your Cash Conversion Cycle
Key Takeaways
The cash conversion cycle shows how long it takes for every dollar you spend to return as cash. The shorter the cycle, the easier it is to grow without feeling constantly squeezed.
Founders have limited control over days sales outstanding and days in inventory. Distributors and marketplaces control payment timing, and improving inventory turns requires coordinated planning across ops, sales, and finance.
Days payable outstanding is often the most flexible lever. Extending it can meaningfully reduce cash pressure.
Modern CPG-focused working capital lenders let you extend payables without straining supplier relationships. They act as a buffer, paying vendors upfront while giving you more time to repay.
Month after month, founders describe the same feeling. Cash goes out fast. Cash comes back slow. The gap between placing a production run and collecting payment from customers feels endless, especially during growth. You may be scaling, adding new doors, or planning bigger runs, but the money to fuel that momentum always seems stuck somewhere in the system.
This trapped cash is what makes operations feel heavier than they should. It’s why founders get anxious about accepting bigger POs or launching into new accounts. It’s why even healthy brands feel chronically tight on liquidity. Understanding how your cash conversion cycle works—and how to shorten it—is one of the most effective ways to reduce that pressure. Working capital lenders can help, but only when used with intention.
This article breaks down what the cash conversion cycle actually measures, why one part of the equation is more flexible than the others, and how the right financing tools can free up working capital without putting strain on your vendor relationships. You do not need a finance background to understand this. You just need to think in timelines.
What Is the Cash Conversion Cycle?
The cash conversion cycle, or CCC, measures how long it takes for a dollar that leaves your bank account to return as cash from sales. Think of it as your brand’s cash journey: you spend money on ingredients, packaging, co-man fees, and freight, then wait for inventory to sell, ship, and get paid for. The longer that journey takes, the more working capital you need to keep the brand moving.
The formula is straightforward:
CCC = Days in Inventory + Days in Accounts Receivable – Days in Accounts Payable
Days in Inventory represents how long your inventory sits before selling. Days in Accounts Receivable shows how long customers take to pay you. Days in Accounts Payable measures how long you have to pay your vendors.
When you add up inventory days and AR days, then subtract the number of days before your vendor invoices are due, you get the number of days your cash is tied up. A shorter CCC means cash returns faster and liquidity improves.
To make this more tangible, picture a standard production run. You buy packaging today, pay for a co-man in three weeks, and ship the finished product to a distributor. That distributor might not pay you for 30 to 45 days. All that time, your cash is locked inside the system. The CCC gives you a way to quantify that timeline so you can change it.
You do not need to build a complex model to understand this concept. The CCC simply helps you see where your cash is stuck.
Why DPO Is the Most Flexible Part of the Equation
Founders often start trying to fix their cash conversion cycle in places that are much harder to move. Days in inventory can improve with better forecasting, tighter production planning, or deeper coordination between sales and ops, but it’s an operational challenge that takes time and alignment between multiple teams. It’s worth pursuing, but it’s rarely a quick fix.
Days sales outstanding is even tougher. If you sell through Amazon, you’re paid on their schedule. If you sell through UNFI or KeHE, they have built-in payment terms and systems that give them all the leverage. These large players can extend payment windows or apply deductions whenever they want. Early-stage brands have almost no ability to accelerate AR. The power dynamic simply isn’t in your favor.
That leaves days payable outstanding, or DPO, as the most flexible lever in the CCC. While you can’t easily make distributors pay faster or tighten inventory turns overnight, you can influence how long you have to pay suppliers. For many brands, vendor terms are short—net 15 or net 30—even when inventory won’t convert to revenue for weeks or months.
Stretching DPO has an outsized impact on your cash flow. For example, if you currently pay suppliers in 15 days and move to 45 days, you’ve created a 30-day buffer. That’s an entire month of liquidity that stays in your bank account instead of leaving early. When you do this across multiple spend categories—packaging, co-man fees, ingredients, freight—the improvement compounds.
This is where working capital lenders enter the picture. Instead of negotiating new terms with every vendor, which can strain relationships or simply fail, these lenders give you the breathing room you need without putting pressure on your suppliers.
How Working Capital Lenders Extend DPO Without Burning Relationships
Working capital lenders designed specifically for CPG operate like a payment buffer. They pay your vendors now, and you pay the lender later over a 30, 60, or 90-day period. Platforms like Settle, Ampla, and Wayflyer have built streamlined systems for this exact use case: extending DPO while preserving cash and keeping vendors happy.
Here’s how the flow typically works. You submit a vendor invoice into the lender’s platform. The lender pays that vendor directly, usually within one to three days. The vendor gets paid on time or even early, which improves goodwill and reliability. You then repay the lender on a schedule that matches your cash inflows. For example, if your accounts receivable typically clear in 45 days, you can choose a repayment window that aligns with that timing.
The value here is not just convenience. It’s cooling the financial tension that builds up when you have to fund production long before revenue arrives. By shifting the repayment schedule to align with your sales cycle, you reduce the cash strain that causes founders to hesitate on growth.
Of course, no financing tool is perfect. Rates and fees matter. Prepayment flexibility matters. Platform usability matters. The right lender for one brand may not be the right lender for another. But when evaluated thoughtfully, these tools let you extend payables without the awkwardness of asking suppliers for longer terms or the complexity of restructuring operations.
Most importantly, they give you control. Cash flow stops being something that happens to you and becomes something you can manage proactively.
Use Financing to Buy Time, Not to Hide the Problem
Even the best working capital tools are not substitutes for healthy unit economics or strong operational planning. They buy time. They create breathing room. They cover the gap between spend and revenue while you fix deeper issues. But they cannot solve structural problems on their own.
If margins are too thin, financing will expose that faster. If inventory forecasting is weak, extended payables can’t offset long-term inefficiency. If growth is outpacing operations, more liquidity may help temporarily, but the underlying system still needs attention.
This is why CCC modeling matters. When you understand the flow of cash through your business, you can estimate how much financing you actually need and whether you can comfortably repay it. This helps you avoid overextending and keeps capital as a strategic tool rather than a default solution.
You want working capital to support growth, not mask the signs that the business is stressed. Used responsibly, it reduces anxiety and gives you room to scale. Used reactively, it can create new pressure.
Cultivar often helps founders pressure-test these assumptions. Small changes to inventory strategy, margin structure, or payment windows can have an outsized impact on your CCC. Capital is one lever, but not the only one.
Smart Lending Can Give You the Time You Need to Grow
Managing your cash conversion cycle is one of the hardest parts of scaling a CPG brand. You’re constantly balancing production timing, vendor expectations, distributor payments, and unpredictable sales cycles. Cash gets stuck in inventory, trapped in POs, or delayed in AR. It’s normal to feel overwhelmed by that complexity.
Working capital lenders give you a way to create space. They shorten the cycle, free up liquidity, and let you keep growing without sacrificing relationships. They make it easier to fund larger runs, support new retail launches, or invest in marketing without draining the bank account.
You still need strong fundamentals, but smart lending can give you the breathing room to build them.
Reach out to Cultivar if you’d like help evaluating your cash conversion cycle or exploring working capital options that support your growth. You don’t have to figure this out alone.
FAQs
What’s a good cash conversion cycle target for an early-stage CPG brand?
There is no one-size-fits-all target, but most early-stage brands benefit from pushing their CCC as low as possible. A shorter cycle means cash returns faster, which reduces the amount of working capital you need to operate. Many emerging CPG brands sit between 60 and 120 days, but the goal is directional improvement rather than perfection. The more you shorten the time between spend and repayment, the more flexible your operations become.
How do I calculate my CCC if I don’t have clean books yet?
You can estimate it using simple timelines. Start with how long inventory generally sits before it turns. Add how long it takes customers or distributors to pay you. Then subtract how long you typically have to pay your vendors. Even rough estimates can reveal where cash is getting stuck. Later, once your books are cleaner, you can refine the numbers. The value is in understanding the pattern, not getting the math perfect on day one.
Will using these lenders hurt my vendor relationships or credit score?
Used correctly, they usually help vendor relationships because suppliers get paid on time or early. Your business credit profile depends on the specific lender and structure, but most CPG-focused platforms are designed to work alongside your existing credit rather than against it. The key is choosing a lender with transparent terms and making payments on schedule. Vendors typically appreciate the reliability these tools create.
