Managing your EMIs at times of uncertain cash flows


Imagine a situation when you have taken a huge bank loan and suddenly some unpleasant situation temporarily causes a break in your income. Such a situation could happen to anyone running a small business and the result will be agonising.

Let’s have a look at what could be done before such a situation happens and how to stay prepared:

Prevention is better than Cure

Build an Emergency Fund: As the popular saying goes ‘It is better to be safe than sorry.’ It is important for entrepreneurs to build a contingency fund for meeting emergency situations. Small savings and profits could achieve this and its purpose is to help you to deal with business uncertainties, recessions or temporary loss, which may cause a fall or stop your income temporarily.

How to Build: Consider your average expenses in a month to plan the amount required for this contingency fund. Experts recommend considering at least six-month expenses for building your emergency fund. This could be even more or less; depending on your risk, tolerance and other liquidity sources. You could invest this amount in any investment instruments but ensure that it is kept in a way that you could access it anytime with ease.

Facing uncertain cash flows

Remain Calm: Uncertain or irregular cash flows are a part of any business, especially in the initial days. Such situations may sound scary, but anyone could be a victim to this. So, the important thing to do is to stay prepared and stay calm.

Talk to your bank: An important thing you should do is to talk to your bank or lender openly about the temporary situations. Irregular payments are sure to affect your credit scores and thereby further funding possibilities. There are options like flexible EMIs or lowered EMIs(for say six months), with some penalties or even re-financing options. These options may be costlier in a long term; but are sure to give you with the much needed breathing space until your cash flows turn healthy.

Stay away from unnecessary expenses: It is imperative to follow the business strategies for expansion, but during a down time, try to avoid unnecessary expenses including advertising expenses; but alternately think out-of-the-box for some smart and less expensive ad campaigns or tie ups.

Don’t Borrow: A big “no” during crisis situations is further borrowing. Generally, all business men deal with crisis situations by borrowing from money lenders or high interest loans like personal loans or credit card loans. This needs to be avoided to the maximum possible extent, as it could be havoc to your financial health over a long term. You could instead rely on your friends and family, if any helping hands are offered by them.

Credit Counsellors: If your situations are complicated, there are credit counsellors who can offer you tips and advises to deal with emergency situations in a better manner.

In short, recessionary situations call for a careful and smart planning. Please share your views on this.


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