You can have a profitable business and still run low on funds at any given time. There are always things to pay; clients can pay slowly, etc.
There may come a time when a slow month can cost you more in payments that need to be made for your next cycle of payments. This shows you should have some money set aside. If an SBA-backed loan goes into default, a personally liable borrower may face collection risks, including wage garnishment in certain circumstances after required procedures
Having money saved for your business is always better than having nothing at all.
Table of Contents:
- How Many Months Can Your Cash Flow Last
- What Liabilities Will Come After You
- Make Sure To Have Money Saved For Emergencies
- Credit Lines Are Not Always Helpful In Emergency Situations
- Improve On What Fails First In Your Business
- Create A Plan For When Revenue Slows Down
- Final Thoughts
How Many Months Can Your Cash Flow Last
Cash flow and revenue are not the same thing. Revenue means you have earned money, but don’t always have the money to pay what you need to on a weekly basis.
Have a monthly cash flow calendar that keeps track of payments that are coming in and what needs to be paid out each week. Be sure to list out your tax payments, rent, loans, wages, and expenses that your business will need to pay each month. Once you have all this information, predict how many months your cash can last. Some months may bring in less cash than others while annual expenses still fall due.
What Liabilities Will Come After You
Many business owners will take out loans to help their companies grow, but when things slow down, what happens to your debt? You want to know what you will owe and how long you’ll have to pay your balance off. Create a list of loans, what the payments are, security, any collateral, and consequences of not paying on time.
Among surveyed employer firms with debt in the Federal Reserve’s 2025 Small Business Credit Survey, 59% used a personal guarantee to secure that debt. This does not only apply to the SBA.
Personal guarantees are common among firms with debt, but whether one is required depends on the borrowing terms. Closing a business or missing an SBA loan payment does not automatically trigger wage garnishment. Whether an individual faces that risk depends on personal liability and the stage of collection. Speak with an SBA Loan Attorney if you are unable to meet your loan requirements; they can see if there are options you can take to fix the problem.
If you have been sent a notice to garnish your wages, the government can take action against an individual’s wages when the debt is federally owned and is non-tax debt. The debt must go through an administrative process that allows wage garnishment. Before administrative wage garnishment begins, the responsible federal agency must send advance written notice that explains the debt and the right to request a hearing. Having a notice does not mean you will get wage garnished, but it is always good to seek advice as soon as you receive one.
Make Sure To Have Money Saved For Emergencies
You should save enough money to keep your business afloat if things become slow. Save enough to pay wages, rent, essential bills, and taxes that you will need to continue to operate. Add these expenses together and see how far you can last with your available cash.
Now that you have your numbers, start saving! Open up a separate business account and save a manageable amount every time cash flow is coming in. You can save more once you have established a pattern of saving. Have the money easily accessible; you don’t want to be saving for 3 years but not have anything to spare when your company needs funds.
Have guidelines in place for what you can use your savings for; you should only spend it if you have to keep your business running. Not to buy excessive amounts of inventory, etc. Always know how you can replenish the money once you spend it, so you can prepare for the next emergency you may encounter.
Credit Lines Are Not Always Helpful In Emergency Situations
Credit lines are beneficial to your business when you need money to make payments, and your client hasn’t paid you yet. But if your business continues to run into losses and you can’t recover, a credit line may not be enough to help. Remember that you will still need to pay this amount back; you just aren’t seeing any increase in profits to help.
Always know how you will be able to pay off credit lines; you should never get into credit just because you don’t have money to pay for things. Ask yourself: Are you going to be able to recover?
Know what types of loans you have and be mindful if they have adjustable interest rates or personal property as collateral. Speak with your creditor or servicer; they may be able to alter your repayment schedule. Always remember you should use credit lines to benefit your business, not as a sole way to pay your bills.
Improve On What Fails First In Your Business
Save money for a financial cushion, but also improve on other areas that will help your business stay profitable.
One of the things you can do is find more customers. If your main source of revenue is from one person, your business can fail when they decide to stop purchasing from you. Find ways to sell more products, services, or obtain different contracts that can benefit your company.
Once you know where to spend, know where you can cut expenses. Cut anything that your company doesn’t need, maybe the overstock you’re carrying, or your supplier will let you buy smaller quantities at a time. Make sure that you don’t decrease costs on things that help your business.
Lastly, collect from your customers as soon as possible by sending them their bills with proper terms, reminders, and requiring deposits. These small habits can help you improve your cash flow, as well as hold onto your hard-earned money.
Be sure to separate your taxes from money that you can use to pay bills. Taking that money can harm your finances later.
These may not seem as fun as expanding your business, but if there was ever a time when you needed these tips, it would be during economic decline.
Create A Plan For When Revenue Slows Down
Having money saved for your business is great, but you also want to create a plan of action when your sales are decreasing.
Have a couple of red flags you can monitor every month to see if your business is heading into trouble.
- Available cash falls below the amount needed to keep the business running.
- Invoices that are becoming overdue, and you’re not gaining new customers.
- Loan payments are coming due before expected customer payments arrive
- A major customer delays or cancels planned work.
When you notice one of these, have someone in your business take action on these red flags. Stop spending money, contact your customers, find more ways to gain customers, speak with your CPA, etc. Make sure to update your cash flow calendar, and see if your projections are matching your actuals.
Make sure you have a written plan of what steps to take when things start slowing down, as well as keeping records of your loans, cash flow, and other important documents. If you ever default or receive a wage garnishment, be prepared to act immediately and seek counsel.
A financial cushion can reduce the chance that a business emergency forces you to rely on personal savings
Final Thoughts
Having money set aside can help your business cover essential bills during difficult months. Knowing what your cash flow calendar looks like, creating a financial cushion, and understanding what liabilities can follow you will help you prepare for the unforeseen circumstances that can happen to your business.
Wanda H. writes the kind of expert financial advice content that people actually send to each other. Not because it's flashy or controversial, but because it's the sort of thing where you read it and immediately think of three people who need to see it. Wanda has a talent for identifying the questions that a lot of people have but haven't quite figured out how to articulate yet — and then answering them properly.
They covers a lot of ground: Expert Financial Advice, Capital Markets Updates, Personal Finance Insights, and plenty of adjacent territory that doesn't always get treated with the same seriousness. The consistency across all of it is a certain kind of respect for the reader. Wanda doesn't assume people are stupid, and they doesn't assume they know everything either. They writes for someone who is genuinely trying to figure something out — because that's usually who's actually reading. That assumption shapes everything from how they structures an explanation to how much background they includes before getting to the point.
Beyond the practical stuff, there's something in Wanda's writing that reflects a real investment in the subject — not performed enthusiasm, but the kind of sustained interest that produces insight over time. They has been paying attention to expert financial advice long enough that they notices things a more casual observer would miss. That depth shows up in the work in ways that are hard to fake.
