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A lot of Brits running small and medium-sized enterprises (SMEs) are currently avoiding business savings accounts, research from Virgin Money has shown, with 42% put off by the poor rates on offer. Another 29%, meanwhile, simply don't want to tie up their cash.
This is despite the fact that there are plenty of accounts out there that offer access on as little as 60 days' notice, or even none at all. One reason for a lack of engagement with savings among SMEs might simply be that they don't have the time.
"We know SME business leaders often have to juggle their many business priorities while ensuring their finances are in order," Hugh Chater, chief commercial officer at Virgin Money, said. Possibly because of this, 33% of small business owners said that managing their business' finances is a necessary evil, while 24% said they do prioritise it, but would rather be working on something else.
It may then not be so surprising to find that 28% of those SMEs that do hold a business account never check the interest rate. "With lots of SMEs not having enough time to shop around for the best deals, many are getting a rough deal," warned Hugh, which may be compounded by the generally poor rates on offer.
Our own figures show that those business savings accounts that require no notice currently pay an average of 0.25%, a lot less than can be gotten from personal easy access accounts, which pay as much as 1.31% (or 0.47% on average). Fixed rate bonds don't fare much better in the business arena, with an average of 1.20% across all terms and the highest available rate of 2.20% requiring a five-year commitment.
However, these rates are still better than what is on offer from most business bank accounts, so small business owners would do well to have a look at our variable and fixed bond charts. After all, the Best Buy rates will be higher than average, and not putting any spare money into a savings account gives you an effective interest rate of 0%.
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