Why Small Businesses Need an Emergency Fund
You probably already know that having a personal emergency fund is important. After all, you need to have a little bit of money set aside in cash you need to make an emergency repair in your home, in case your car breaks down or in case someone in your family gets sick. What you might not have thought about, however, is the fact that your small business needs an emergency fund as well. Here’s why.
Emergencies Do Happen
Just as you never know when an emergency might affect your home and family in your personal life, you never know when an emergency might strike your business. Depending on the type of business that you run and the industry that you are in, there are all sorts of things that could go wrong. You could deal with a major problem with your commercial building, such as an electrical or wiring issue. Your equipment could break down, leaving you having to pay for a costly repair or replacement when you least expect it. Even if you have insurance, it could take a while for insurance to pay out, or your claim could be denied. Having an emergency fund can help you ensure that you can handle these emergency issues right away so that you can keep your business up and running.
Cash Flow Issues Can Cause Big Problems
Even if your business is doing well overall, cash flow issues can happen and can cause a lot of problems. For example, if you have big clients who haven’t paid their invoices yet, this could leave you running low on the cash that you need to buy more supplies or to pay the rent on your commercial building. Having an emergency fund can help you keep the lights on and keep your business running when these cash flow issues do arise.
Having Extra Cash Can Equal Better Opportunities
You could find yourself in a situation where making an investment now could really help your business. For example, you could find a good price on a piece of equipment that you need or stock that you need to purchase, but you may need to act quickly in order to get the deal. If you have an emergency fund, you can use this money so that you can take advantage of opportunities that can help your business grow and thrive.