By Anil Arora, Head of Customer Services at State Bank of India UK
At a time when both the economic climate and winter weather are having a harsh effect on small businesses, owners are doing everything they can to make and save as much money as possible.
Although it might not seem like a priority for many SMEs, finding a competitive savings account can be an important step to securing your business’s long-term profitability.
Ready access to savings deposits without complicated withdrawal limitations is a must, according to State Bank of India, which also stresses the importance of getting a great interest rate on your savings.
Why leave your business’s savings sitting in a current account when you can take advantage of the high interest rates on offer with many of today’s savings deals? But it can be tough to decide which account to choose: some of the highest paying offers restrict their customers through withdrawal restrictions, while others have low rates and require high minimum deposits.
As far as State Bank of India is concerned, savings accounts for businesses should always take into consideration the needs of the customer and should always be transparent, flexible and easy to understand.
Savings accounts available for SMEs
An additional factor is how long you are willing to tie-up your money. The account you choose will largely depend on whether you are prepared to deposit your cash for a number of years, or whether you are likely to need instant access to your cash.
Small businesses in the UK can currently take advantage of a number of business accounts, including fixed-rate bonds — where your cash is tied-up for a set period — and accounts with fewer restrictions.
Bonds are a good option if you are looking for a relatively high interest rate, but the drawback is that you might not be able to access your cash until it matures, which is usually at least one year.
The standard notice period for most other business savings accounts is between one and three months before you can withdraw your cash. Others have penalties attached, where the interest offered is reduced every time a withdrawal is made.
State Bank of India’s Business Instant Access Savings account offers SMEs a competitive interest rate of 1.5% AER (1.49% monthly interest) with no penalties or waiting period when you need to withdraw your savings.
State Bank of India UK believes that banks should do more to assist the country’s SMEs. We understand the pressures faced by small businesses in the UK and believe that they should not be penalised for accessing their cash. SMEs should have ready access to their cash, without forfeiting their interest.
Minimum deposits for opening an account
Something which can often seem daunting when opening a business account is the matter of the opening deposit. Business owners should shop around to find the savings account with a deposit level that is the most feasible for their company. Some 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, which might not have such large sums of money available to deposit in an account. The State Bank of India Business Instant Access Savings account, for example, requires a more accessible £10,000 deposit.
The safety of your savings
State Bank of India also stresses the importance of ensuring you are covered by the Financial Services Compensation Scheme (FSCS). Initially established to help private individuals, smaller businesses are now also covered, providing the company has a turnover of under £6.5m, a balance sheet of less than £3.26m and has fewer than 50 employees.
At present your savings are covered up to the value of £50,000 in the event of your bank collapsing, if it is covered by the FSCS. This is now set to increase to £85,000 from the 31st of December 2010.
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.
There are many tasks that small business owners need to keep on top of, with cash flows, stock takes and payrolls to name just a few. However, having a competitive savings account can give small businesses one less thing to worry about, knowing that their hard earned money is not only being looked after but also making a profit in the process.