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Does Your Business Need an Emergency Fund?

February 15, 2013

After a hurricane or other natural disaster, many businesses find themselves severely compromised or crippled in the wake of its destruction. The devastating events surrounding Hurricane Sandy are a reminder of the costly impact that such disasters can have on a business and its ultimate sustainability. While it is impossible to predict when a disaster will strike, having an emergency fund can be a critical safety net in keeping your business afloat and running both during and after a storm.

Should a natural disaster or other unexpected devastation force your business to shut or slow down, access to immediate cash can help you keep going without further delay. Availability of cash also hedges against risk of submerging into an endless cycle of debt that can often stem from using credit cards for tending to immediate repairs and recovery. While emergency fund goals vary depending on each business’s income and expenses, it is typically recommended that a business put aside enough funds to cover at least four to seven months’ worth of expenses. (more…)