There’s a lot of confusion when it comes to business savings – you might not see the point in shopping around to find the best deal, or maybe you don’t see the point in having a business savings account at all. This means there’s a lot of lazy money sitting around in current accounts earning next to nothing, when it could be working hard for your business. In fact, the UK’s small and medium sized businesses are collectively missing out on over £1 billion^ each year in lost interest, all because their lazy money isn’t working hard enough.
If you want to grow your business, you need to know how to make the most of your money. So, before you make any decisions about what to do with your surplus cash, check out these four myths about business savings and the truth behind them.
1) "Interest rates are rubbish, so it's not worth my time to switch"
Recently we surveyed over 1,000 business owners to find out more about their saving habits and found that 42 per cent review their business savings account less than once a year or never at all. When we asked why, almost half of the businesses we spoke to said because they didn’t think the potential returns are worth the effort of looking for a better deal and shifting their cash.
There’s no denying that many business savings accounts offer paltry rates of interest. In fact, 14 per cent of the businesses we spoke to said they were getting 0 per cent interest, while 29 per cent were getting between 0.01 and 0.5 per cent. This doesn’t mean that all interest rates are rubbish though. In fact, your lazy money could be earning between 1.10 and 2.00 per cent interest in one of our business savings accounts.
Put your lazy money to work in an Aldermore Business Savings Account
2) "I'll have to lock my money away for years in business savings accounts"
It’s a common misconception that for savings to be worth it, your money needs to be locked away for years and years. It’s true that for better returns, more long-term, fixed rate accounts are more lucrative – but don’t let that put you off. You can have all the flexibility you need with an easy access ‘no notice’ savingsaccount, while still taking advantage of great interest rates.
At Aldermore, we understand the importance of flexibility, which is why we offer a range of different business savings accounts, built to suit the way you do business. With our Easy Access Account, you can make deposits or withdrawals as often as you like, whenever you like. For those who don’t need instant access however, our Customised Fixed Rate Account lets you choose how long you want to put your money away for, from 60 days to five years.
3) "I'll fall out of favour with my bank if I have my savings elsewhere"
81 per cent of the businesses we surveyed said that they hold their business savings account with the same bank as their current account, and this is a common trend. Part of the reason behind this is that businesses think it’s easier – 41 per cent said they stick with one bank because they like to manage everything in the same place.
Many others are under the impression that it could damage their relationship with their current bank if they have their savings elsewhere. There is a misconception that if you want to apply for a mortgage, loan or other financial product, you’ll give a bad impression of your business if you don’t keep all of your money in the same place, but this just isn’t true. Also, there is a fear that money held away from your main bank isn’t accessible if needed in a hurry.
Savings held in a no notice savings account with Aldermore can be transferred back to your current account quickly and easily the next business day via faster payments. It isn’t about shifting banks, just shifting cash.
4) "Businesses aren't saving money"
Finally, a common myth is that businesses just aren’t saving any money. The belief goes that any profits are instantly invested back into the business, rather than being saved. But again, this couldn’t be further from the truth.
Over two-thirds of the businesses we spoke to have a business savings account, and 17 per cent have over £50,000 in surplus cash. Rather than re-investing all of their profits, businesses are saving money for a number of different reasons. The most popular uses for surplus cash were to help with cash flow fluctuations (39 per cent), and protection against unforeseen events (36 per cent)*.
Not sure if you're getting the best deal? Why not use our Business Savings Rate Checker, which compares business current accounts and savings products from over 90 banks and savings providers against our own.
You wouldn't allow any other business resource to stand idle, so why should you let your surplus cash sit around doing nothing? By shifting your surplus cash to a business savings account, lazy money could quickly become easy money.
Isn't it time you put your lazy money back to work?
^ Calculated using the following sources: The most recent figures from the BBA show cash held by small and medium sized businesses in current and deposit accounts totals £163.5 billion (BBA: Bank support for SMEs – 4th Quarter 2015). With an average rate paid of 0.69% on all live business accounts including current, variable an fixed accounts (SavingsChampion.co.uk- March 2016) and rates available in excess of 1.50% fixed for 12 month (Business Moneyfacts 16/05/2016).
*All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,008 Small Business Decision Makers. Fieldwork was undertaken between 4th - 12th April 2016.
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