Why does my business need an emergency fund?
Published October 16, 2019
1.) Cash flow problems: According to The U.S. Bureau of Labor Statistics, 82% of new businesses fold because of cash flow issues. Don’t let that happen to you! Your business can be tight on cash because it’s your slow season, you’re waiting for outstanding invoices to be paid up or you just depleted your funds for a huge marketing campaign. Having funds available to keep you afloat when you’re short on cash will allow you to steer clear of expensive loans or a complete business failure.
2.) Actual emergencies: Emergencies in businesses can take the form of damaged goods or property, stolen merchandise or broken equipment. While you may be insured against these losses and damages, it can take time to file a claim and recoup the loss. Having liquid funds available during times of crisis will enable your business to continue operating while you recover.
3.) Timely opportunities: Occasionally, you’ll come across a fantastic deal that can help you expand your business or launch a new product line. It might be a great location for a storefront that just hit the market or a line of top-quality goods at an excellent price. Your emergency fund will give you the freedom you need to help your business grow.
Setting up your fund: The ideal business emergency fund will have enough cash to get you through 3-6 months of business expenses. The exact amount of funds you’ll need will vary with the nature and specifics of your business.
The idea of saving up thousands of dollars might seem daunting, but if you set your mind to it, it can be very doable. Set your goal and then build your fund a little bit at a time by trimming your business expenses and putting every extra dollar you earn into your fund.
Make payments to your emergency fund a regular item in your business budget and set up an automatic monthly transfer to it so that you never forget. Stay away from risky business ventures until your emergency account is completely funded.
Storing your emergency fund: You’ll want the money in your emergency fund to be easily accessible and penalty-free in case you need to withdraw it. Maps Advanced Business Money Market account is the perfect place to store your emergency fund.
Our Advanced Business Money Market account has no monthly service fee and no transaction fees (limited to 6 transactions per month). This account gives you the highest savings interest rates we offer based on a tiered blended rate applied to that portion of your account balance.
An emergency fund might seem superfluous, but it is crucial for staying solvent at all times. Make the effort to start saving for your fund today!
Have questions about opening a Advanced Business Money Market account or any other business accounts? Contact Lisa our Maps Business Deposit Program Manager and she will be happy to help.