When COVID-19 struck in 2020, many small business owners learned the hard way how important an emergency fund can be. But even without a global pandemic, there are many situations when an emergency fund can make the difference between your business’s survival and failure.
The loss of a big customer, a natural disaster, a lawsuit or the owner’s serious illness can all bring a small business’s income to a grinding halt. When such a crisis strikes, an emergency fund can be the lifeline that enables your business to keep operating until normal sales resume.
How much money should you keep in your business’s emergency fund? Where can you find the money to build sufficient savings while still running your business? SCORE’s checklist includes resources to help you identify your business’s essential expenses and determine how much money you should save to cover them in a crisis. It will also help you brainstorm other possible sources of emergency financial aid.
Finding extra money to put into an emergency fund can be challenging for a small business on a budget. Our checklist will provide ideas for ways you can reduce expenses and generate extra cash so you can contribute to your emergency fund on a regular basis.
When should you use your emergency fund? Use this checklist to decide which situations qualify as emergencies. The checklist also suggests alternative actions you can take before tapping into your precious emergency savings.
Hopefully, you’ll never have to use your emergency fund. However, knowing it’s there if you need it can give you peace of mind and help your business survive should the unexpected arise. Use SCORE’s checklist for building and using an emergency fund to consider all your options and create a plan that works for you.
Would you like help figuring out how to build an emergency fund? Contact a SCORE mentor online or in your community to get free advice.
Reprinted with permission from - score.org