2 min read
Definition
A sinking fund is cash accumulated on a regular schedule to meet a specific future obligation — repaying a bullet or balloon, replacing a major asset, or covering a lease-end dilapidations bill.
In plain terms
Rather than facing a huge payment cold, you save towards it a bit at a time. When the day comes, the money is already there.
Why it matters for your company
A sinking fund turns a looming lump-sum liability into a manageable monthly discipline, protecting cash flow. Pair it with a reserve and a forecast. See bullet loan.
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