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Savings accounts explained
Getting a business off the ground can be tough. From launching new products to hiring staff, you’ll have plenty on your plate – so it’s easy to forget about savings.
Saving isn’t reserved for families and individuals. One of the benefits of a business savings account is that it can help your company set money aside for emergencies, future growth or simply a rainy day. While it can be tricky to prioritise saving over other business needs, even a small amount of savings could give your business a handy financial cushion.
Read on to explore the potential advantages of a savings account for business purposes. We’ll cover the key features of these accounts and consider some common reasons to build a nest egg.
Should my business be saving?
Saving can often feel out of reach as you progress through your business journey. Start-ups might be more focused on fundraising, for example, while those scaling up may be prioritising expansion plans. Likewise, larger firms may overlook the importance of business savings as they navigate evolving markets, economic turbulence or potential acquisitions.
Setting aside even a small portion of your profits can seem like a big ask. But having savings can help your business in several ways, including:
- working towards specific business goals
- covering emergencies or one-off costs
- reducing your company’s reliance on debt
- topping up your income during quieter months.
Is it good to have a business savings account?
A savings account for business purposes works in a similar way to traditional accounts for personal use. There are plenty of features to look at:
- Ability to earn interest. Each account has a specific interest rate, showing the returns your money will make over time.
- Flexibility over deposits. You may have the option to pay in a lump sum upfront – or make regular deposits as you go.
- Ringfencing your nest egg. Separating savings from your main business bank account can help to keep them front-of-mind.
- Different access options. Some accounts provide instant access to your cash for when you need it most. Others lock your money away for a fixed period but usually offer higher interest in return.
- FSCS protection. The Financial Services Compensation Scheme could safeguard up to £85,000. It can step in if anything happens to your provider.
What are the different types of business savings accounts?
There are three main types of business savings accounts to consider:
- Instant access. These accounts let you take money out as and when it’s needed. Typically, instant access accounts offer more options for deposits and withdrawals, along with variable interest rates. Depending on your provider, rates may be lower in comparison to other types of account.
- Notice. These accounts allow you to access your funds after giving notice. Typically, you'll need to provide 35 to 95 days' notice when you need to withdraw your money. in return you'll typically get a better interest rate than an instant access savings account.
- Fixed term. Fixed term accounts are usually suitable if you want to earn higher interest on your savings but don't need to access your funds regularly. Fixed term accounts give you a fixed rate for a set period, but you won't be able to access your funds without paying a penalty.
What should savings be used for?
A business savings account could support you with a wide range of goals. You might be considering a major purchase, investing for the future, or preparing for potential instability. Common uses include:
- funding a new product line or additional services
- covering the cost of extra kit, such as tools or IT equipment
- paying towards the wages of a new staff member
- expanding your marketing strategy
- upgrading your office space
- funding employee benefit schemes.
Building a healthy savings balance might also give you something to fall back on if your finances are subject to seasonal swings. For example, if you rely on summer tourism. Stashing away cash as your profits spike could help to ease the strain of leaner months.
Ultimately, saving might feel like a luxury when you’re focused on running your business. But even a small amount can provide a safety net in times of uncertainty – or help you to make the most of fresh opportunities.
Want to know more about business banking or the benefits of opening a savings account? Take a look at these other helpful guides from NatWest:
Want more support with business savings accounts?
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