How business savings accounts can help SMEs to grow

Running a successful small business means carefully balancing day-to-day expenses while planning for future growth. In the current financial climate, with costs rising and economic conditions shifting, it’s more important than ever to make your money work harder. 

That’s why it could be worth exploring business savings accounts – a tool that can provide stability, flexibility, and even help fund your company’s next big move.

Although the Bank of England recently lowered the base rate to 4.5%, many business savings accounts continue to offer attractive options. For SMEs, this presents a chance to explore products that can help make the most of any surplus funds.

The current SME landscape

SMEs account for over 99% of all businesses in the UK. That’s around 5.5 million small businesses — compared to just 8,250 large businesses — and they play a crucial role in supporting the country’s economy, providing approximately 16.7 million jobs, and generating an annual turnover of around £2.4 trillion. 

However, the landscape isn't entirely rosy for small businesses. Despite lower borrowing costs, many SMEs face persistent cost pressures and shrinking growth opportunities. The Federation of Small Businesses recently urged lenders to swiftly pass on rate reductions, emphasising the need for businesses to focus on growth, rather than mere survival.

In this challenging environment, effective financial planning is more important than ever – and one way SMEs can strengthen their position is by using business savings accounts. These accounts can help small businesses build a financial buffer, earn some interest, and better prepare for any unexpected expenses or growth opportunities.

The benefits of a business savings account

A business savings account offers more than just a place to park cash – it’s a tool for growth and financial security. 

• Earn interest: Generate extra income on funds, rather than letting money sit in a low-interest current account.

• Plan ahead: Save for planned expenses, such as new equipment, marketing campaigns, or staff hires.

• Build a cushion: Create a safety net for unexpected expenses or seasonal downturns.

• Prepare for tax season: Set aside money for business taxes.

What accounts are available?

Business savings accounts function much like personal savings accounts, offering different options to suit varying business needs.

• Easy access accounts: These provide flexibility, so your business can withdraw funds whenever necessary without penalties.

• Notice accounts: Designed for businesses that can plan withdrawals in advance. These accounts typically offer higher interest rates in exchange for a set notice period before accessing funds.

• Fixed-term: Ideal for businesses that can lock away funds for a predetermined period. These accounts tend to provide the highest returns in exchange for limited access to the funds.

It’s worth noting that there’s no limit to the number of savings accounts your company can have. So, you might choose an easy-access account for emergency funds, and a fixed-term account for long-term savings. Just keep in mind that managing multiple accounts could create extra admin.

Everything else you need to know

While you don’t have to have a business savings account, it could be a wise financial move. Building a cash reserve that covers at least three months of operating expenses, for example, could protect your business if sales drop unexpectedly.

If you're a sole trader, you can technically use a personal savings account for your business funds. However, opening a dedicated business savings account will generally simplify financial management, tax returns, and expense tracking. 

The process of opening a savings account is typically quick and straightforward. What’s more, most providers will allow you to link your business current account to a savings account, making it easier to transfer funds and manage cash flow efficiently. 

Having a business savings account isn't just about earning interest – it's about building resilience. Whether preparing for growth, safeguarding against financial shocks, or just wanting to make your money work harder, the right savings account can help your business thrive.