How to Prepare for a Working Capital Emergency

How to Prepare for a Working Capital Emergency

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Working Capital Cash Crunch


As a small business owner, it’s important to keep your company financially agile at all times. Even if you’re experiencing an excellent period of growth and prosperity, there are always factors outside your control that can wreak havoc on even the best-laid plans. In order to weather an unexpected storm, it’s smart to have an emergency working capital plan on hand at all times. Check out these simple steps to get started.


Build an Emergency Fund

Just as you’d build a personal emergency fund, you need to create one for your business as well. As you become profitable, set aside a certain percentage of your income that’s just meant to be for emergencies. This isn’t a fund to use for future growth. Instead, it should only be used to help keep your business afloat. Perhaps your business suffers because of a major cold spell or you lose your biggest client. Keeping an emergency cash fund on hand lets you pay for your day-to-day operations while navigating whatever challenges you’re facing.


Keep Your Financials Organized

Don’t wait for tax season to get your financial documents in order. You should always have statements up to date in case you need to quickly apply for funding to keep your business viable. A working capital loan can get cash in your account within just a couple of business days. To make the process as fast as possible, stay on top of your income and expenses and other documentation so it’s easy to submit to your lender.


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Diversify Your Business

There’s a lot to be said for doing one thing and doing it well. But if the success of your business rests solely on one person or product, you could set yourself up for a dramatic loss of working capital if that one thing tanks. A competitor could steal your product idea, or an unhappy employee could walk off with the bulk of your client portfolio. You can prepare for these unfortunate circumstances by creating diverse income streams for your company.


The Bottom Line

A working capital emergency can be the event that either helps your business thrive in the long run or doom you to failure. Don’t rely on reactionary practices when an unexpected emergency occurs. Instead, be proactive and plan in advance to get the working capital you need to stay in business.


Topics: Business Management, Working Capital Strategy, Working Capital Shortage, Working Capital Emergency

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