2 min read
What it means
A contingency fund (or emergency reserve) is a pot of accessible cash kept aside for genuine surprises — a lost contract, an equipment failure, a sudden cost. It is not the same as a sinking fund, which is earmarked for a known future bill; a contingency fund is for what you cannot foresee.
How to size it
Three to six months of fixed costs is the common benchmark, more if your income is lumpy or concentrated. Build it gradually and hold it somewhere accessible. Pair it with a standby facility so a larger shock does not drain the fund to zero — the reserve absorbs the first hit, the facility covers the rest. Size the target with the cash-runway calculator.
What it means for you
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.
Frequently asked questions
How is a contingency fund different from working capital?
Working capital funds day-to-day operations; a contingency fund is a separate reserve for genuine emergencies. Ideally you keep the two distinct so an ordinary cash dip doesn't eat into your emergency cushion.
Should I invest my contingency fund?
Keep it accessible — the point is availability, not return. Locking it into long-term or illiquid investments defeats its purpose. A little interest matters less than being able to reach the cash the day you need it.
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Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.