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Michael Brown

Content Writer
Published: 31/03/2022

Written by Alun Williams, Commercial Director of Savings at Shawbrook Bank.

This article is not intended to be finance advice to any individuals. The views expressed are those of the author and Moneyfacts.co.uk does not endorse the content.

Britain’s economy has faced unprecedented challenges over the past two years. As the country starts to recover from the pandemic, consumers are feeling the impact of higher cost of living as a result of rising energy prices and wider inflationary pressures.

But what about small and micro-businesses? While consumers have benefited from a level of Government support, many small businesses have fallen through the cracks and may be facing increased financial pressure as a result.  

If you’re a business owner, you’ll be familiar with the juggle of how to balance your finances – whether it be managing cashflow and suppliers, paying employee wages or investing in growth opportunities.

The good news is a business savings account can help. Having a pot of savings has many advantages which are particularly pertinent in the current economic landscape.

We polled 500 small businesses across the UK* and found that more than six in 10 (64%) of respondents have some form of business savings in place. And for those business owners who have no financial safety net in place, it’s never too late to start.

Here Alun Williams, Shawbrook Bank’s commercial director of savings, discusses the benefits of a business savings account and how starting to save now could lead to growth and a stronger future for your small businesses.  

1. Gain interest on your hard-earned cash

A business savings account rewards you for the success your hard work has earned – and ultimately, makes your money work harder, even if interest rates are low.

Once you’ve accumulated the funds, the next step is to put it into an account with a favourable interest rate where it can grow until needed. This allows you to save for future business growth, but also earn more interest on your deposits.

The type of business savings accounts that work best for you depends on your needs as a business, and whether you need access to the capital quickly or are happy to lock your money away for longer.  

The simplest account to open is an easy access account. This provides you with the flexibility to access your cash at any given time, allowing you to deposit or withdraw funds as you like. However, if you don’t need access to the money, you can receive a more competitive rate on fixed-term accounts. Fixed term business savings bonds lock your money away for a set period of time.

So, if timed properly, a fixed-term bond can mature right at the time you may need a cash injection throughout the year. This option would be great for bills or when seasonal peaks that impact your business occur. It’s important to keep in mind that you won’t be able to withdraw your funds until the bond matures so ensure you don’t need access to your money before the set period ends.

Shawbrook Bank has a range of business savings products from easy access to one or year fixed rate bonds. To find out more about our business savings accounts, visit www.shawbrook.co.uk.

2. Enable future growth

As the saying goes, cash is king. From the day you start a business, cash generation is key to its survival, but as start-up loans are paid up, what’s left in the pot shouldn’t be allowed to languish.

Our research shows that 63% of small and micro business leaders expect an increase in their business activity. So, if your cash flow is increasing, you may be looking to help support the future of your business. You’ve worked hard to ensure that your efforts prove fruitful, and with a business savings account you open the chance to nurture what’s left. Interest acts as a small payday for your savings, trickling extra funds into your account.

When we spoke to small UK businesses, more than half (55%) said they plan to expand thanks to the savings they already have in place.

The money accumulated in a business savings account sits ready to be injected into future business projects. For a business to grow, you likely need to spend money on expansion projects, marketing, and other incidentals on its journey. 

For some traditional bricks and mortar-based businesses, the pandemic showed that they could switch to a digital-focused format and still reap the same benefits as having a physical shop. Online shopping surged during the pandemic, leading many small businesses to switch their business model and focus on ecommerce.  

Whether you’re an online business with a team of ten, or a sole trader on the high street, savings are still just as important.

For sole traders, ISAs could be a good option as they can be opened as a personal account in your name. Stocks and shares ISAs typically offer better returns but aren’t suitable as a short-term option or for those with a lower risk-appetite, as the value of your investments can go down as well as up. Each tax year you can subscribe £20,000 into a tax-free ISA. 

3. Prepare for unexpected costs

In a COVID-recovering era, with many people now considering job changes, having the ability to draw from your savings quickly has never been more important.

As payroll numbers reach record highs and demand for recruitment increases, having extra cash available to hire new staff, provide support for skills or retrain teams can also help your business win in the war for talent. Having savings in place to meet this increased demand is essential.

While an easy access account typically pays lower rates, it offers access to your cash when you need it – providing a rainy-day fund for your business in the case of the unexpected.

It could allow you to purchase additional stock, hire staff to cope with increased footfall or even expand or improve the firm’s premises.

4. Be ready for future tax liabilities

Whether you’re running a limited company or operating as a sole trader, one thing is certain - you’ll have to pay your taxes. A business savings account can help you to save for future tax liabilities, allowing you to earn interest in the meantime.

It’s easy to forget to save for tax payments when you’re focused on running a business. But a business savings account allows you to plan ahead and set monthly savings goals, so the final tax bill isn’t something to dread after all.

By creating a medium-term savings plan, this allows you to factor in inevitable costs like taxes, which can be paid into your business savings account at a set time every month to ease the financial bill further down the line.

5. Protect your money

If you run a small business, it’s likely that managing your working capital is key to your success. That means it’s essential you keep your cash safe and well protected.

A business savings account adds a level of security. At Shawbrook Bank, we protect up to £85,000 per depositor by the Financial Services Compensation Scheme (FSCS), the UK’s deposit guarantee scheme. Deposits will need to be eligible, for more details visit FSCS.

This provides an extra level of peace of mind and security to your hard-earned cash – meaning you can focus on the day-to-day demands of running a business.

The bottom line: it’s never too late to start saving

It’s never too late to start saving and prepare for the future of your business. It pays to be savvy with your spare cash, so you can reach your business goals.

At Shawbrook Bank, our approach to savings is simple and transparent. Whether you want to lock it away for a set period of time or have flexibility while still gaining a return, we offer a business savings account that works with the way you do business.

Whether you are a micro or small business, incorporated or unincorporated, you can start or continue your savings journey by depositing as little as £1,000 up to as much as £2 million. We offer a variety of award-winning business savings accounts that allow you to make the most of your cash.

 

*The research was commissioned by independent research company, OnePoll in July 2021 and surveyed 500 UK micro-business (25 or fewer employees).

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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