Small businesses in the UK have an average of £75,000 in spare cash but nearly half of firms (49%) store this money in business current accounts usually paying zero interest, research from Recognise Bank reveals.
The challenger bank is warning that SMEs could be missing out on hundreds of pounds in potential interest by not using business savings accounts.
Bryce Glover, CEO of Recognise Bank, said: “Most business current accounts pay no interest and many of the big banks get away with offering their business customers very low-interest rates on savings too.”
Nearly one in five (18%) SMEs surveyed use a business savings account offered by their main business bank account provider. Only 12% of firms transferred excess cash to a business savings account with a different provider.
Recognise Bank hopes to encourage more businesses to look for a better deal on their savings after launching an Easy Access Savings Account paying 0.55% AER.
Glover added: “Most SMEs don’t tend to shop around for better rates which means the banks that pay low-interest rates have their business customers – and their cash – over a barrel.
“This has to change, especially during these economically challenging times where any extra interest income could help companies with some of their spiralling costs, which is why we have decided to launch our new account now.”
The latest figures from the ONS reveal inflation reached a record high of 6.2% in February 2022 and it’s putting businesses under increasing pressure. According to the CBI, the number of manufacturers expecting to push up prices has jumped to the highest level since records began in 1975.
As costs continue to rise, it is likely more businesses will have to fall back on their surplus cash. According to Recognise’s research, the main reasons businesses set this money aside is to use as emergency fund (30%), to deal with late payment or other cash flow problems (29%) and for new investment into their business (23%).
Traditionally, opening a business savings account with a new provider has been a lengthy, time-consuming process for firms, but Recognise Bank’s new business savings account has been created to fix that.
Glover continued: “The Business Easy Access Account is perfect for SMEs setting money aside for a specific purpose, such as paying a VAT or tax bill or saving for a future purchase, maximising their potential interest income while ensuring they can access their money when they need it.”Click below to share this article