Derin Clark

Derin Clark

Online Reporter
Published: 14/08/2019

Almost one in 10 (9%) small or medium-sized business (SME) owners are at risk of burnout as they haven’t had a holiday for more than five years, findings from Simply Business reveal.

The main reason that prevents SME owners from taking holidays is money concerns, with three in five (62%) revealing that that potential loss of earnings is the primary issue that prevents them from taking time off work. As well as this, more than a third (35%) estimate that taking a holiday costs them at least £2,500 in lost earnings, while almost one in 10 (8%) estimate they’re losing out on double that figure at £5,000 or more for every holiday they take. One in five (19%) also admit to finding holidays stressful because they’re not bringing in any money.

More than one-third of small and medium-sized enterprises (SMEs) are having difficulties with cash flow due to late payments, research from BACS Payment Schemes Limited reveals.

According to the research, 43% of SMEs experienced late payments during 2018 and, of these, 78% of had to wait one month or more beyond their agreed terms before they were paid. This resulted in an estimated total of £13bn late payment money being owed to SMEs. Receiving payment beyond the agreed date is likely to affect the cash flow of SMEs as they are more likely to rely on these funds than larger organisations – there are ways to ease cash flow difficulties however.

Businesses with surplus cash reserves may well be acting with caution, particularly during times of uncertainty, with many keeping their cash in a business savings account from a high street name. Yet this means they could be missing out on the most lucrative returns, with the latest research from Moneyfacts.co.uk revealing that the best rates within the business savings market come from challenger banks – and in even better news, competition between these newer brands has caused rates to rise substantially in the last year.

This is particularly the case in the one-year bond sector. For example, the top-paying one-year fixed business bond is from challenger BFC Bank and currently pays 2.50%, 0.48% more than the best deal seen a year ago, with the average one-year rate having similarly increased from 1.10% to 1.41% (see the table below for more details). Not only that, but this is a higher rate than the top deal available from a personal savings account, with BLME's one-year bond paying an expected profit rate of 2.20%.

The figures go on to reveal that the top business savings deal from a high street bank has also increased, though to a far lesser extent – Bank of Scotland and Lloyds Bank have a one-year bond paying 1.15%, which is up from 0.80% a year ago but still a far cry from BFC's rate of 2.50% – highlighting the benefits of opting for a challenger over a high street name.

Business savings market analysis


Business savings rates


April 2014


April 2018


April 2019


Average one-year fixed


1.36%


1.10%


1.41%


Top one-year fixed


Aldermore – 1.85%


Al Rayan Bank – 2.02%*


BFC Bank – 2.50%


Top high-street bank one-year fixed


Santander – 1.40%


Bank of Scotland / Lloyds Bank – 0.80%


Bank of Scotland / Lloyds Bank – 1.15%


Lowest high-street bank one-year fixed


HSBC – 0.55%


Santander – 0.50%


Santander – 0.50%

Top bonds at £10,000 gross. High-street banks considered are the biggest on the high street that offered a bond as per the year above, including: Bank of Scotland, HSBC, Lloyds Bank and Santander. *Sharia'a compliant. Source: Moneyfacts.co.uk

"Businesses who are looking to lock away some of their capital reserves will be pleased to find that the interest rates offered on one-year fixed business bonds are on the rise," said Rachel Springall, finance expert at Moneyfacts.co.uk.

"Challenger banks have been competing in this market consistently over the past five years in particular, and now the top deal even surpasses the best rate possible on personal savings bonds over a one-year term. Indeed, BFC Bank, which launched its one-year bond within the past six months, leads its sector with an interest rate of 2.50%."

This just shows how important it is for businesses to consider these fresher brands for their capital, yet few seem to be taking the plunge. Indeed, a recent study by Aldermore revealed that the majority (65%) of SMEs hold their surplus funds with the same provider as their personal savings account, and if they're on the high street, they're unlikely to be achieving a significant return.

"One-year fixed bonds now take up a quarter of the market for all fixed business bonds, but there are very few available from the largest high street banks," said Rachel. "If businesses choose these more familiar brands over the top deals, then they will be losing out on a better return on their cash. Businesses would be wise to review where their cash is held and consider choosing a one-year fixed bond from a challenger bank to weather any financial storm, especially if they want to keep their cash safe and make a decent return on their reserves in the process."

What next?

If you're a business owner and don't need access to your cash reserves on a regular basis – perhaps if you're keeping a lump sum untouched for a future tax bill, for example – you could get a far better return by choosing a one-year bond from a challenger bank. Take a look at the business bond Best Buys and you'll soon see why these lesser-known names are worth considering.

With a storm of economic uncertainty looming on the horizon for UK businesses, all sizes of organisations are busy looking for a relatively safe savings harbour in which their deposits can wait things out.

At present there are a number of providers offering attractive terms and rates to business savers – not least in the fixed rate bonds market. Here competition has seen the gap between providers widen, with some pulling away to take a commanding lead. While we have seen similar jockeying for position in the personal savings sector - especially for fixed rate ISAs – business bonds are showing the largest difference between the best rates for savvy business savers.

Topping the short-term business fixed rate bonds chart currently is the 12-Month Fixed Term Deposit Account 1 from BFC Bank. With a tempting rate of 2.5% AER this bond requires a minimum deposit of £10,000, with interest being paid on maturity. Ideally placed for business savers who don't need access to their deposits for the period of this 12-month bond, the account can be managed by post or telephone with a maximum investment limit of £1 million.

The BFC Bank leads the way by some margin over their nearest rivals, Al Rayan Bank who are currently offering an AER of 2.17% (expected profit rate) for their 12-Month Fixed Bond. Al Rayan Bank, which operates under Islamic principles, do have the advantage of having a much smaller minimum deposit requirement of just £1,000. Profit is paid quarterly but again no withdrawals or access is allowed before the bond matures. In addition, there is no deposit maximum.

Still in the 2.0% + bracket is the ICICI Bank UK Fixed Deposit Account with a rate of 2.02%. While not paying to the same level as BFC Bank or Al Rayan Bank, the ICICI Bank UK bond offer the two attractive benefits of a minimum £1 investment and early access to business funds – the latter being subject to a 1.00% interest penalty.

The Union Bank of India (UK) Ltd follows the lead of these top three with advertised AER rate of 1.92% while Aldermore and United Trust bank are both offering a 1.85% fixed return.

For those interested in a variable rate business savings product, the returns are commensurately smaller than their fixed rate cousins with the top AER currently being offered by Al Rayan Bank at 1.51% (expected profit rate) for their 90-Day Notice Account. However, the advantage for business savers lies in the fact that access to your monies is much easier, with withdrawals being allowed subject to a 90-day notice period. Making this an even more attractive proposition is the low investment minimum of just £250 and the fact that the account can be managed traditionally in branch, online, by telephone and even post.

Currently occupying second and third places in terms of their advertised AER are the 90-Day Business Notice (Issue 11) account from Hampshire Trust Bank – offering 1.40% AER – and the 35-Day Business Savings Account (Issue 2) from the Redwood Bank with a 1.35% AER. In both cases withdrawals (subject to the notice period) are permitted, with minimum deposits of £5000 and £10,000 respectively.

While nothing stays the same in the constantly changing financial markets the above are great example of how competition between providers is driving the best deals during this period of economic uncertainty. If the business savings markets follows the same pattern as their personal savings equivalents we are likely to see more changes in AER and the continued jockeying for position amongst the marketplace players – All of which makes the outlook for business savers just a little bit sunnier.

 

The business finance community will be buzzing today, as the Business Moneyfacts Awards finalists have just been announced. These awards are the highlight of the year for the industry, with plenty of healthy competition for those coveted trophies.

So, who will be victorious? The winners will be revealed at an evening awards dinner on 28 March 2019, held at Battersea Evolution London and hosted by Russell Kane – so you'll have to wait a little while longer to find out.

The 35 awards showcase everything from the Buy-to-Let Mortgage Broker of the Year to the Best Bridging Finance Provider, as well as the best overall Business Bank of the Year. They are not only a chance for providers to enjoy a bit of glory, but also for business customers to gauge who they may like to work with in the future.

Lee Tillcock, editor of Business Moneyfacts, comments: "The last 12 months have witnessed a continuing revival in the business finance sector. Despite the ongoing political debate surrounding the future trading arrangements of the country, many businesses have grown and increased profitability and as this appetite for funding has increased, brokers and providers have embraced the opportunity to boost trading and growth levels.

"The 18th annual Business Moneyfacts Awards ceremony will once again celebrate and reward those who have offered the best products and services. Inviting the opportunity to spotlight those providing support within the commercial world, the evening of 28 March will see this widely-anticipated event provide a welcome boost to those who have grown, innovated and excelled in their specific sectors in the last year."

We wish all the very best of luck to our finalists; you can see who they are by clicking here.

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