If you are currently looking for the best possible savings account for your small business, it is important to go through some of your options before deciding on anything in particular. There are some accounts that pay more than others, so you will need to know what you have to choose from. The savings account that you choose for your business will be very important to your overall financial well-being.
Opening Your Account
If you don’t already have one, you will need to open a business current account before you can open a business savings account. You will be asked to submit the name, address and company registration number before you can proceed. This process usually doesn’t take very long, and it is necessary.
Types of Savings Accounts
There are numerous types of savings accounts that you will have to choose from. Some of these options include regular saver, fixed term, notice and easy access accounts. Because each type of account is completely unique, you will need to learn as much as possible about each of them.
Before you make a final decision, you need to determine if you require instant access to your cash, because not all businesses do. A fixed-term account will not allow you to take out any of your money early. If you have a notice account, you will have to give advance notice before you are allowed to get access to cash.
Both notice and easy access accounts have variable rates, so you will benefit if interest rates go up. This also means that your money could earn less if rates go down, so you should keep that in mind as well. These accounts offer lower rates to begin with, but they can go up over time.
A bonus account is another option that you should look into. This will let you make withdrawals, but you receive a bonus if you choose not to take any money out. Make sure that you think about how you would like to manage your account. The best rates typically come with online access accounts, though you may want to have physical branches that you can visit.
Savings Accounts vs. Current Accounts
If you decide to go with a traditional business savings account, you will likely end up paying a higher rate than with a current account. Sole traders that plan on maintaining a small account balance will want to think about opening a personal in-credit current account.
Protecting Your Money
The Financial Services Compensation Scheme ensures protection of funds up to £85,000 in savings accounts. Small businesses have the same protection as everyone else, so you won’t need to worry about that. It is important to keep in mind that this limit is per banking license and can be spread out over multiple brands.
If you are planning to keep a lot of cash in your savings account, you should consider putting it in numerous banks. By doing this you will be able to get the protection you need for your money. Those who keep amounts that exceed the protected FSCS limit are running the risk of losing some if their bank goes under at any point.
This protection limit is applied to accounts jointly for sole traders. This means that the limit will cover the total of all the balances that get deposited.
Sole traders can transfer their money between their business and a personal account, as both are in the same name. You will find that a lot of banks offer great rates on personal savings. If you are a sole trader, you should consider going with this option.
An offset mortgage can be a very good idea if you are self-employed. This will let you keep your entire savings pot in an account that is tied to your mortgage. Your bank won’t charge you interest on the same amount you owe on your home loan when you do this.
Sometimes the difference between traditional interest rates and offset mortgage rates can be nominal, but this is not always the case. If you are going with this option, it is important to proceed carefully so you don’t end up losing more than you have to.
All small business owners should make a point of reviewing their savings account options before selecting one in particular. The right savings account can go a long way towards helping you earn as much as possible on the money you deposit. This choice will also determine how much risk you are taking, so you shouldn’t rush into a final decision. If you want to get the best deal on a savings account, you need to do the necessary research first. Take the time you need to compare different savings accounts at various financial institutions.