We know you are working hard, but what about your business cash?

There has been much focus in recent years about the savings rates available to personal deposit holders as base rates have fallen to record lows for a sustainable period. With the recent additional introduction of further quantitative easing, and the prospect of additional capital being pumped into the UK fiscal system during the course of 2012, the likelihood of base rates rising during the course of the next 12 months, if not longer, is considered to be unlikely as confirmed by the Bank of England in their recent report dated February 2012.

However, it could be argued that there could be contradiction in the form of improving deposit returns, certainly for personal accounts, with fixed rates now available at around 3-4% over shorter periods of time as confirmed in my previous February blog headed “Savings rates 2012/2013? What are the possibilities?”

Moving away from the subject of personal deposits savings, raises the question as to what can be achieved for business owners who have accumulated cash during the recession, possibly in preparation for expansion where the appropriate opportunities have not manifest themselves and this cash is held at the bank, as an example, earning minimal interest because of current low base rates. We have experienced and seen in the last few months increasing interest rates both with personal accounts, as already indicated, and also with business accounts. There are few opportunities that are available to business owners to try to achieve reasonable returns to get their money working harder in line with the extra hours that they have had to put in during this recession.

Examples of deposit rates available from well-known deposit takers as follows:

Provider	Name of account	% Gross PA	Comment
Santander	Business Reward Saver	2.0% AER	Instant Access, minimum deposit amount £5,000.
Clydesdale	12 months Business Term Deposit	3.0% AER	12 months’ notice, minimum deposit amount £5,000
Investec Bank	Business High 5 Account	2.25% AER	Minimum deposit £50,000. 3 months’ notice required
Bath Building Society	Business Direct 100	2.4% AER	Minimum deposit £2,500. 100 days’ notice required

Please note that terms and conditions can apply to these rates and deposit rates can fall as well as rise and are not guaranteed.

Another opportunity for businesses who may not be prepared to tie up money for a long time are Money Market Accounts. These are accounts normally offered by the banks. However, we have noted in our experience that they are not widely marketed and are usually for sums in excess of £25,000. One easy way to find the details of the Money Market Accounts is to type “Money Market” into the search box of your bank’s website and this will normally provide you with the contact details of the Money Market Department. This may also provide you with some of the rates that they will currently offer. In our experience, you will find that the rates offered under Money Markets are lower than those of Deposit Accounts, however it does provide the opportunity for short-term interest gains which may be important if a business requires flexibility for its cash when seeking capital opportunities.

It should be noted that it is possible for businesses to invest into other areas such as stocks and shares, property and other investment derivatives. Chapters Financial can help you with your business investment planning, if this is of interest.

As you can see from the above many companies are working very hard at the moment to achieve their overall objectives in this continuing time of austerity. It is also important that their money works as hard as they do and if there are opportunities to receive returns on capital whilst deciding how to utilise this for their businesses future gain then this is usually worthwhile considering.

Please note that any interest earned is subject to Corporation Tax at your highest marginal rate.

The details above are for information only and should not be seen as specific advice. If you would like to receive specific advice for your business investment planning then please contact Chapters Financial on 01483 578800.

Keith Churchouse FPFS

Director

Chartered Financial Planner

Certified Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Services Authority.