When the recession struck Britain back in 2008, the level of funding from traditional banks to SMEs crashed almost overnight. Businesses were no longer able to lend from banks, and struggled to prosper without the means to borrow money for essential maintenance or research and development.
The most effective way for SMEs to safeguard against this eventuality is to build their own cash reserve to draw from when the time comes.
So, what are the options for a business savings account?
Easy Access Savings
An Easy Access account is arguably the safest route for business savings, as you still retain flexibility to make unlimited deposits and withdrawals, so no money is tied up beyond reach. This kind of account suits businesses who keep a surplus of cash in their current account and would like it to work harder without letting go of the safety net it gives them.
Different banks have varying terms and conditions, but ordinarily you’ll need to keep a base figure of around £1,000 in the account to continue to benefit from a competitive interest rate.
A fixed rate account ties money up for a pre-determined period of time, and it’s in this type of account that funds will glean the highest rates of interest. Better suited to those businesses who have a lump sum to invest but don’t want it tied up for any more than a couple of years at a time, the fixed rate account offers lucrative interest rates without high-risk.
If a company has made plans for investment, for example in new machinery or advertising, but not in the immediate future, then the money might be best placed in a fixed rate account to cultivate at a steady rate until required.
Fixed Rate with Access
If you like the sound of a fixed rate account but are nervous about tying too much money up, a fixed rate account with access is probably the best option. In these accounts, money is tied up for a pre-determined period of time and therefore still benefits from high interest rates, but some limited access is granted during its term.
Again, offerings differ depending on who you bank with, but an example would be if 25 per cent of your account balance remained available to be withdrawn in one lump sum without notice.
Not only do business savings offer peace of mind, but they keep funds working hard, building up a stronger cash reserve for the future.
Jennifer Bowden is Search Marketing Executive at Delineo.
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