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When you eventually start your business, you’re no doubt busy with 101 different things. You may be busy trying to get finance together or trying to make your budget go as far as possible. It’s easy to forget one of the key things you should be saving up for – an emergency fund.

An emergency fund is an invaluable buffer to help you get back on your feet when times are tough. It’s a good idea for anyone to set aside money for an emergency, whether a business or an individual.

Emergency funds can cover quiet months where you struggle to pay for rent, car repairs, your washing machine suddenly breaking down and anything in between.

Why you need one as a business owner

We’d recommend that your business has an emergency fund as a safety blanket to cover unexpected costs that could stunt your business growth or lead to financial problems.

Though it’s not always possible to save in the beginning, when it does become possible we would recommend doing so. You can’t be too careful, even if business is good now. Get into the habit of saving regularly when times are good to cover you when times get tough.

Ensure you keep your emergency business fund separate from any personal funds. You can’t expect to use the business one for your car breaking down, unless you need to car to conduct business.

Below are a few examples of times when an emergency fund is handy to have.

Repair bills

Equipment doesn’t last forever, eventually printers, servers and computers break down and none of them are cheap to replace. This is particularly the case if you’ve bought second hand equipment to keep the costs down in the beginning.

Quiet periods

Every business has quiet periods but if it’s particularly bad, an emergency fund can help cover you during this period. This will save you from having to make cut backs that might otherwise dampen your progress and lead to more problems over time.

Recruitment costs

Employees could leave at any time. While you’ll usually have a month to find someone else, recruitment might not be cheap. There’s money spent on adverts, on time for interviewing. If you have to interview a lot of people, these costs add up. If you need to make use of a recruitment company to find people with specialised skills, this can also be very costly.

Avoid debt

If your only option is to resort to debt to get you out of a tricky situation, this can snowball into a bigger problem. An emergency fund can be a healthier alternative to dip into as debt can hold the business back for years.

Relying on insurance

Many people will not bother with an emergency fund because that’s what insurance is for, right? Well, a lot of insurance companies will only pay in exceptional circumstances that would shut down your business. They may or may not cover emergencies like equipment breaking down for example.

Even if your insurance does cover stuff like this, it takes time to approve a claim without any guarantee that they will. In the meantime, business is suffering.


Do you have an emergency fund in place, either personal or business? Have you ever been caught out with an unexpected expense an emergency fund could have covered? Let us know your thoughts below.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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