Written by: Steven Petter
If you have a business current account and your business is doing well you may have quite a lot of money sitting in your current account which isn’t earning you the interest it should be, business saving accounts act in exactly the same way as your personal account except they are designed solely for businesses.
Business savings accounts: What are the options?
The general rule of thumb is that the easier it is for you to access your surplus cash from your savings then the lower the rate you will see returned on the balance. For example if you have an easy access account then you will be allowed to freely move the cash from one account to another without incurring much in the way of penalties, the minimum amount will usually be lower too however you will see the lowest available interest rates.
If you want a higher rate on your balance and you have the financial stability to be without that cash for a long period then you can opt for a notice account which will give you greater return but you will need to provide the bank with notice before you can remove the money, normally anywhere between 30 to 120 days and in some cases more. Although this option is much less flexible it does provide more financial stability for those who have a bigger net income and can afford to squirrel their money away for longer without it affecting their business as these are usually used in instances where business improvements are made, such as a new business van or new tools.
A third option, called a Fixed-Term bond is there for those who can afford to put a large amount aside for a fixed period of 1 to 3 years without the possibility of accessing that money in that time frame. These normally call for greater financial stability because as well as the time constraints you usually only bank one large sum at the opening of the account and are not permitted to make any more payments until the end of the life of the bond.
Read the small print
The financial benefits of having a business savings account can be huge if you are confident about the rate your business will be growing and the support you have from financial advisors, however there are many tax and interest pit falls when it comes to completing tax returns and not every account will offer you the best support and you will need to make sure your trawl through the small print as many accounts will have limits on withdrawals that force you to incur charges should you contravene the rules. Make sure you know all the ins and outs of the account you are signing up to and always get clear financial advice from an independent party to ensure that business savings accounts are the right things for your business at that time. Be wary of off shore accounts as the tax benefits can come at a hefty price and if you are looking to go off shore it can be extremely complicated, like I always say, get the right advice from the right source and you can’t go wrong.