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When Jackelyn Gallo talks about business liquidity, she doesn’t speak in abstract banking terms. As SVP and Regional Market Executive for JD Bank in Baton Rouge, she’s witnessed firsthand what separates businesses that thrive during crisis from those that merely survive.
“After every storm we face in Louisiana, you see it clearly,” Gallo explains. “The business owners who open their doors first, call back their available staff immediately, and help their community and other businesses recover—they’re most often the ones who are liquid and have their ducks in a row.”
With more than 25 years in commercial banking, Gallo has seen this pattern repeatedly. Liquidity isn’t just an asset on a balance sheet; it’s the cornerstone of financial stability and competitive advantage. It is crucial for both business owners and consumers.
To put it simply, liquidity is defined by the ease with which someone can access cash to meet obligations. “Cash is king” is a phrase she’s heard throughout her 25-year banking career, for good reason.
“It’s not just about having cash available for day-to-day operations,” Gallos says. “It’s about maintaining enough cash on hand to meet short-term debt obligations without being forced into late payroll or selling assets at deteriorated prices.”
Liquidity is an important part of the puzzle when you’re applying for a loan.
“As lenders, we walk a fine line when making credit decisions,” Gallo says. “We often see a business owner applying for credit when they have already entered a dangerous zone. With little to no liquidity on hand to help them through unforeseen economic cycles, there is a significantly increased risk for default, for non-payment, or even for bankruptcy. It is a priority that we help a business owner achieve goals without overextending them.”
Gallo respects clients who are debt-averse. At the same time, she encourages proactive planning through the use of operating lines of credit for businesses that have cash flow gaps in their business cycle.
Liquidity is under-appreciated by some investors as well, she says, believing that “excess cash in the bank is cash that is not working for them.” They proudly maintain multi-million-dollar portfolios with minimal cash on hand, until one shutdown reveals the vulnerability of that strategy.
Gallo in general recommends maintaining at least six months of operating expenses in reserve, enough to cover everything from daily operating expenses and payroll to rent, taxes and vendor relationships.
For a consumer, six months can also be an ideal emergency cushion, but Gallo advises that in business that standard is variable depending upon the industry. The needs of a retailer during a holiday season will be vastly different than a year-round service company, for example.
“Commercial banking is like the medical field,” Gallo says. “No two patients are exactly the same. You may have the same diagnosis, but you’ll never treat them identically.”
The reward for maintaining strong liquidity? When a crisis hits, liquidity helps you prepare for opportunities and challenges you can’t predict. Businesses with a healthy liquidity position are poised to capture market share, strengthen community relationships, and emerge stronger than before.
