With cash flows, stock takes and payrolls to keep on top of, finding a competitive savings account may not seem like a top priority for many SMEs.
However, as the harsh December weather takes its toll on SMEs’ productivity and sales, ready access to savings deposits without complicated withdrawal limitations is a must, we believe at the State Bank of India, which also stresses the importance of getting a great interest rate on your savings.
There is little point in leaving your business’s money sitting in a current account when you can take advantage of higher interest rates by opening up a savings account. But the tough decision can be which account to choose: some of the highest paying accounts make it difficult for customers to access their cash when they need it through withdrawal restrictions, while others have low rates and require high minimum deposits.
The State Bank of India believes that savings accounts for businesses should be transparent, flexible and easy to understand, and always take into account the needs of the customer.
Types of savings accounts for SMEs
There are currently a number of products in the savings market for small businesses in the UK, including fixed-rate bonds – where your cash is tied-up for a set period – and accounts with less onerous restrictions. Something that is important to consider, however, is for how long you are prepared to have your money tied into an account.
believes deposits should be lower for smaller businesses, who should shop around for an account that offers a more accessible minimum deposit of up to £10,000
Bonds pay a relatively high rate of interest, but you cannot access your cash until the bond matures, usually after a year. Most other savings accounts require a three- to one-month notice period before you can withdraw your cash. Others have penalties attached where the interest offered is reduced every time a withdrawal is made.
Anil Arora, Head of Customer Services at the State Bank of India UK, understands the importance of giving SMEs ready access to their savings when they may need them most: ‘Given economic pressures and the constant need for ready cash, we believe SMEs should have access to their money at any time, but should not have to compromise on their interest rate as a result.’
Minimum deposits for opening an account
The minimum deposit required for opening a savings account is an important issue for small businesses, as it means they will not have access to that portion of their money if they wish to keep the account open. Business savings accounts can require a minimum deposit of up to £50,000.
State Bank of India believes deposits should be lower for smaller businesses, who should shop around for an account that offers a more accessible minimum deposit of up to £10,000.
Keeping your business savings safe
Aside from the issues of accessibility and initial costs, another important factor when deciding on the best account for your business should be whether or not you are covered by the Financial Services Compensation Scheme (FSCS). The FSCS was largely set up to assist private individuals, however, smaller businesses are also covered providing the company has a turnover of under £6.5m, has a balance sheet of less than £3.26m and has less than 50 employees.
If for any reason your bank collapses, your savings are currently covered up to the value of £50,000 if it is covered by the FSCS. This is set to increase from the 31 of December 2010 to £85,000.
As State bank of India is one of the safest, most well-capitalised banks in the world, is covered by the FSCS and has been ranked as one of the 200 most reputable companies in the world by Forbes Magazine – it knows a thing or two about bank safety.
The bank advises small business owners to look at all available options to decide what will be most beneficial for them.
A savings account may not be your top priority for now, but the instant access to cash provided by the right account may prove to be a valuable asset in future.
