Traditionally, banks and building societies have treated business cash poorly – offering far inferior rates than those paid to private individuals.
However, the launch of new business accounts from little-known providers such as Redwood Bank and Bank & Clients (B&C) has improved the situation and is a really encouraging boost to the business savings market.
So, if your business has cash sitting in a business savings account with a high street provider, who will often pay next to nothing on working capital, now is the time to shop around for the best rates.
We understand that businesses often have better things to do than worry about the interest they can earn on the cash they hold.
However, if you could earn nearly four times or more than you are currently getting from your bank, which could be used to pay bonuses or even the salary of a member of staff, perhaps this would be an incentive to switch to a better account, even to a provider you may not have heard of.
For example, with some business savings accounts paying as little as 0.01%, a company with £200,000 in savings could be earning as little as £20 a year in gross interest.
However, by moving to the best paying business easy access savings account, they could earn nearly £2,380 a year - effectively free money - for simply moving to a more competitive provider. And if they don’t need easy access to all of that money, they could earn even more.
Our Cash Advice Service regularly helps businesses which hold a minimum of £200,000 in cash savings to earn as much interest as possible. However, the average amount held by businesses using our Cash Advice Service is around £720,000.
'They could miss out on a massive £45,150 in interest'
A business with a balance of £720,000 risks losing out on an average of £450 a month in interest if they fail to move their money to the best paying accounts.
That means over the next five years, they could miss out on a massive £27,000 in interest, assuming rates remained the same.
Top easy access business accounts include Kent Reliance Business savings account issue 1 paying 0.90% on a minimum balance of £1,000, while United Trust Bank’s Business 1 year Bond pays 1.45% on a minimum balance of £500. And the aforementioned Redwood Bank pays 1.35% on a 95 Day Notice Account.
Remember that if you operate as a sole trader, you don’t have to keep your business savings in a business account, so you can take your pick from the best personal savings account rates, some of which pay more.
With expert guidance and monitoring, it is possible for businesses to not only increase their savings income, but also to ensure that their money is protected.
The Financial Services Compensation Scheme (FSCS) protects savings up to £85,000 per business, per banking licence, if the savings account provider runs into financial difficulties.
But, as a word of caution, this doesn't mean you'll get £85,000 protection for every account, savers are protected up to £85,000 per person, per banking licence.
This means that if you have more than this amount of savings with one institution, our savings experts can advise you on how to spread your business savings across several different providers, to ensure your funds are fully protected.
To find out more, simply call us on 0808 164 6466 and we will review your existing savings account(s) for free. If we can’t improve your savings return as a result of using our service then there is no commitment to proceed.
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A review of your business's cash account could significantly increase the interest you earn