Establish a “rainy day account” separate from a bank line of credit or bank loan. It is much better for you to be your own banker. If you want to pay interest, pay it to yourself. You’ll want to establish an interest-bearing account at a bank or a money market fund. There are several contractors who have established stock mutual funds for their rainy day accounts. In my opinion, these are too risky for dollars that you think you will need at some point within a year.
There are two easy ways to invest in your own rainy day account. The first is to write a check to this account for 1% of all deposits that come to the door. This takes discipline. You can’t wait until the end of the month to do it. You’ve got to do it every day or at least once a week. The key is to make the amounts small. You won’t miss 1% of revenues. And the deposits add up over a period of time.