Unexpected expenses: 5 small business costs to know and how to finance them

August 03, 2022

Unexpected expenses like equipment breakdowns, license and permit fees, taxes, payment delays—there’s a lot of small business costs to worry about as an owner. Here are some unexpected expenses to watch out for, plus how best to prepare.


A budget is an essential tool for running a small business. As a business owner, understanding and planning for your monthly expenses is crucial to maintaining positive cash flow. Unfortunately, unexpected events can turn your small business budget on its head. The best course of action in preparing for life’s unexpected moments is to make financial safety plans. First, here are some common (and often expensive) events or fees to prepare for:


1. Equipment repairs and replacement unexpected expenses

Equipment often provides a critical function inside a business. For example, a coffee shop can’t run without its commercial espresso machine, a local moving company wouldn’t get very far without its fleet of trucks and most businesses would be in trouble if computers crashed. Unfortunately, most pieces of equipment will eventually break down and require repair or even replacement. The bill can be costly, but if your business cannot operate without the equipment, it isn’t an optional expense.


2. Supply costs unexpected expenses

With inflation at record highs, chances are your supplies cost more today than they did last year or even last month. While you can shop around for the best prices, you’ll likely need to pay the higher amount and adjust your budget going forward. Price increases can be difficult to predict but having open conversations with your suppliers can help you plan accordingly. You may need to raise your own rates to recoup the difference.


3. Professional fees unexpected expenses

While owners are experts in their companies, they’re not always knowledgeable in every area of business, such as filing taxes or handling legal issues. Using a professional, such as an accountant or lawyer, is a smart investment because it helps protect against making mistakes that could be even more costly. Professional fees can get expensive, but they are crucial to your business.


4. Employees unexpected expenses

Payroll should be a regular part of your monthly budget but hiring and retaining employees can have some hidden expenses you didn’t anticipate. For example, you may need to hire a recruiter to help you find good candidates. Or you may need to provide training to get new employees up to speed on your operations. Employee expenses also include background checks, benefits, and additional equipment in addition to their wages. These costs can add up, especially if you didn’t plan for them.


5. Shrinkage unexpected expenses

Unfortunately, businesses may suffer a loss due to shrinkage, which is the loss of a product. Shrinkage can occur due to shoplifting, employee theft, an error in paperwork, or supplier fraud. Loss of products means you may need to restock sooner than you anticipated. According to the National Retail Federation, the average shrink rate for retailers is 1.6% — and shrinkage doesn’t just happen in stores. Offices face shrinkage through a loss of supplies, such as paper, pens, and small equipment like headsets while restaurants experience shrinkage due to expiration of perishable goods or wrong orders.


Creating a financial plan for unexpected small business costs

While unexpected bills will likely arise, you don’t have to let them catch you completely off guard. Your next step is to prepare by putting funding in place. Here are four good options for creating a small business financial plan:


Create small business emergency fund

Your first course of action should be to create an emergency fund with money set aside to cover these scenarios and others when needed. Having extra funds on hand won’t prevent unplanned expenses from happening, but it provides peace of mind and an ability to handle whatever comes your way. You can also add a line item to your budget for miscellaneous expenses, adding an extra 20% for unforeseen costs.


Use a small business credit card

Sometimes having extra funds on hand isn’t always possible. In this case, banks have several solutions that can offer financial assistance. For example, having a business credit card can be an efficient way to pay for equipment repairs or to cover the rising cost of supplies. Many offer low interest and rewards, such as cash back, which can help reduce your overall costs.


Apply for a small business line of credit

Putting a business line of credit in place before you need it is a great way to pay for larger sudden expenses, such as an expensive repair bill on a critical piece of equipment or a need to replenish your inventory. A line of credit can be a good tool for managing your cash flow.


Apply for a small business loan

If you need to replace a piece of equipment or add to your assets due to growth or expansion, you can also consider equipment financing. This type of funding allows you to pay for the item over time with flexible terms.

For large unexpected expenses, look into getting a quick loan, which can provide up to $250,000 for projects. Or your bank can help you apply for a SBA loan, which can be as much as $5 million. These financial tools are good for purchasing new equipment or for taking advantage of unexpected opportunities, like acquiring another business.

When you own a small business, it can help to expect the unexpected expenses. By planning for the cost of what could happen, you protect your small business and your livelihood.


Learn more about U.S. Bank’s small business loans that can help your business survive an unexpected expense.

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Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.