An emergency fund is a cash reserve that helps your business handle unexpected expenses or revenue drops without panic. Having one protects your business, keeps operations running and reduces stress during slow seasons or surprises.
Emergencies happen, from equipment breakdowns to delayed client payments. An emergency fund helps you cover payroll, rent and other fixed costs even when cash flow is tight. It also gives you flexibility to take advantage of unexpected opportunities without jeopardizing your business’s stability. You do not want to be in a situation where you need to inject more money into your business after it gets running.
Aim for three to six months of essential operating expenses, including rent, payroll, utilities and insurance. If your business is seasonal or your income fluctuates, you may need to save more.
A business emergency fund gives you peace of mind and keeps your operations steady during uncertain times. Building one gradually ensures your business is prepared for challenges while maintaining long-term stability.