If you run a business from your home office, it could be vulnerable to a variety of common financial emergencies. This is because you may not have enough money to both pay your personal expenses and keep your business running at the same time. In a worst case scenario, you could actually lose your home if you are unable to pay your business debts. What are some of the financial issues that could lead to the end of your home business?
You Lose a Major Source of Income
If you lose a client who represented a large share of your income or you find out that you have lost a more traditional job that was your main source of income, you could find it impossible to pay your bills. The same is true if you find out that your spouse lost a job that provided the cash needed to pay personal or business expenses or perhaps both.
You Fall Ill
Spending even a single night in the hospital could cost thousands of dollars if you don’t have insurance. Even if you do have insurance, it could still cost hundreds of dollars that you may not have in your bank account. If you have a serious illness such as cancer, you could face hundreds of thousands of dollars in medical bills. Your only option may be to file for bankruptcy, which could result in the end of your company if you are a sole proprietor.
A Child Falls Ill
While you may think that falling ill yourself is a bad enough scenario, it wouldn’t compare to the thought of your child being sick. In addition to the emotional toll it would take, you may have large medical expenses to deal with. Furthermore, you may not have the time to take care of your child and run your company at the same time, which could lead to a cash crunch for your home business.
You Need to Repair Your Home or Vehicle
If your engine seizes or your fuel pump stops working, you could spend a lot of money to repair your vehicle in addition to the time it may take to repair it. A natural disaster could cause total destruction to your home that may take months or years to repair. Even if you have car or home insurance, you may still have to pay your deductible plus the cost to rent a vehicle or an apartment while your current property is rebuilt.
You Are Sued By a Client
If a client is injured while on your property or claims that he or she was hurt by a defective product, you could face a significant lawsuit. The same is true if that client says that you breached a contract or took other action that caused financial injury to that person. Depending on the size of the lawsuit, it may be necessary to liquidate your home or other assets to pay the debt.
Should you own a home business, it may be worthwhile to get an insurance policy to protect you financially from a variety of events. You never know if an illness, a natural disaster or a lawsuit could take a toll on your finances and the viability of your home business. Taking action now may soften any blow that you have to take or at least make it easier to rebuild after the event takes place.