As a business owner, you know that investing your money wisely is key to long-term success. Despite this, the range of options to choose from can make the whole experience fairly intimidating and you may find yourself a bit overwhelmed.
In this guide, we'll walk you through the importance of choosing the right business investment account.
We'll explore the different factors you need to consider when making your choice, as well as the various types of accounts available to you.
We'll also give you some helpful tips on how to open an account and avoid common mistakes so that you can make the most of your investments and achieve your financial goals.
Whether you're interested in a traditional checking or savings account, a high-yield savings account, or anything in between, we've got you covered.
| Provider/Account | Score | Details |
|---|---|---|
| 1. Barclays Business Banking | ★★★★★ | Learn more |
| 2. HSBC Business Account | ★★★★★ | Learn more |
| 3. Lloyds Bank Business Banking | ★★★★★ | Learn more |
| 4. NatWest Business Banking | ★★★★★ | Learn more |
| 5. Aldermore Business Savings Account | ★★★★★ | Learn more |
| 6. Metro Bank Business Instant Access Account | ★★★★★ | Learn more |
| 7. RCi Bank Business Savings Account | ★★★★★ | Learn more |
| 8. Paragon Bank Business Easy Access Account | ★★★★★ | Learn more |
| 9. HSBC Business Money Market Account | ★★★★★ | Learn more |
| 10. Lloyds Bank Business Money Market Call Account | ★★★★★ | Learn more |
Factors to Consider When Choosing a Business Investment Account
1) Assessing Your Business's Liquidity Needs
Before you commit to any one investment account, it's crucial to assess your company's liquidity needs.
Liquidity refers to how available your cash is or how quickly other assets in your business can be converted into cash.
Determining the amount of money that your business needs to keep in the investment account for immediate use, and how much can be invested for the long term is also vital to know.
If your business requires access to cash frequently, you might want to opt for an investment account with high liquidity and minimal penalties for early withdrawal. On the other hand, if you don't need immediate access to cash, it might be worth trying investment accounts with higher interest rates and longer-term options.
2) Understanding Your Investment Goals & Strategy
It's also critical that you and your business partners have identified investment objectives and time horizons specific to your company.
For instance, if you're seeking a short-term investment to cover immediate expenses or emergency funds, a money market account or a savings account with a high interest rate might be appropriate.
Alternatively, if you're looking to grow your business's wealth over a more extended period, a long-term investment strategy involving stocks, bonds, or mutual funds might be more suitable.
Lastly, always keep your business's tolerance for risk in mind when choosing an investment account. If you're not comfortable with the risk and aggressive scalping in stocks, you'd probably feel more comfortable with more conservative options like certificates of deposit or Treasury bills.
3) Comparing Fees & Expenses
Investment accounts often come with sneaky fees and expenses that can eat away at your earnings.
So to determine the most cost-effective option for your business, it's essential to know the differences in fees between all your potential candidates.
Some fees to consider include maintenance fees, transaction fees, and early withdrawal penalties. And remember, always read the fine print and ask questions before choosing an investment account to avoid any unexpected costs.
How to Open a Business Investment Account?
Researching Different Account Types & Providers
There are still a few things you and your business should come to terms with before we go over your options, like knowing the different types of business savings accounts available.
Some of the more common options include:
1. Stocks & Shares ISAs for Businesses
These are tax-efficient personal savings accounts that allow your business to invest in a range of stocks, shares, and other investment vehicles.
2. Investment Bonds
Investment bonds are more of a longer-term investment product that similarly offers various different tax benefits for businesses.
3. Investment Trusts
These are publicly traded investment companies that invest in a range of assets so you can increase market exposure.
Once you've decided on the type of investment account that's right for your business, you'll need to research the different providers that offer these accounts.
Checking Eligibility Requirements & Documentation Needed
Before you can open a business investment account, ensure you meet all the eligibility requirements. As a heads up, most providers will require you to be a UK resident and have a registered business in the UK.
In terms of documentation, you'll typically need to provide proof of your identity (passport, driving licence, etc.) and proof of your address (such as a utility bill or bank statement). You may also need to provide documentation that proves you're the owner of the business (such as a certificate of incorporation).
Transferring Funds & Making Your First Deposit
Once your account is set up, you'll need to transfer funds into the account to start investing. Most providers will let you do this via bank transfer or direct debit.
You'll typically need to make a minimum deposit to get started, although the amount will vary depending on the provider and the account type.
Some providers may also charge an annual fee for managing your investments.
Once your funds have been transferred, you'll be able to start investing in a range of different assets, depending on the type of account you've chosen.
Traditional Business Investment Accounts
Now that we've got all the formalities out of the way in terms of selecting the right business savings accounts for you, let's go through your options – starting with the more traditional options.
Overview of Traditional Business Investment Accounts
These normally refer to things like checking and savings accounts that are specifically designed for businesses. They're widely regarded as essential for managing a company's finances, including cash flow; payment processing; and interest earned on deposits.
Essentially, the primary goal of these accounts is to provide businesses with a safe and secure way to manage their funds and make transactions.
Checking accounts are fairly common in terms of a business investment account, allowing companies to deposit and withdraw funds as needed. Savings accounts, on the other hand, offer higher interest rates and help businesses save money for future expenses or investments.
Pros & Cons of Using Traditional Business Investment Accounts
Like any financial product, these kinds of accounts have their pros and cons. Some of the advantages of using these types of accounts include:
Convenience
Business investment accounts offer a range of features that make managing finances easier, such as online banking and mobile apps.
Access to Credit
Not only can it provide you with a secure place to invest your funds, but these accounts can also help you establish a solid credit history which in turn can make it easier for you to obtain business loans and other forms of credit down the line.
In fact, many financial institutions look favourably upon businesses that have investment accounts because it shows they're proactive in their approach to finance management and are committed to long-term success.
By regularly contributing to an investment account, you can demonstrate to lenders and creditors that you are a responsible borrower who is capable of managing their finances effectively.
Security
Business investment accounts are typically insured by the government up to a certain amount, making them a safer option for storing funds.
However, there are also some disadvantages that shouldn't go unmentioned, including:
Fees
Many banks charge fees for maintaining a business investment account, which can eat into profits.
Limited Interest Rates
While savings accounts offer higher interest rates than checking accounts, they are often lower than other investment options, such as stocks or bonds.
Best Options for Small Businesses & Start-ups
Now that we've covered the basics, let's find out what the best business savings account is for start-ups and smaller companies.
1. Barclays Business Banking
One of the investment accounts that Barclays offers is a Business Savings Account, which is specifically designed to meet the financial needs of businesses. This account boasts competitive interest rates so businesses can grow their savings over time.
Naturally, since start-ups often need to conserve their cash, any extra money you can make is a good thing.
Additionally, it's really easy to access your funds with an account like this as they don't have to be tied up in any long-term bond/investment. So, if you suddenly need to make an unexpected payment or take advantage of a new opportunity, you can get your money quickly without any hassle.
2. HSBC Business Account
First of all, the HSBC business account has a great reputation as a financial institution with a long history of serving businesses of all sizes, and start-ups are no exception. With their business savings accounts, you can access a range of financial solutions tailored specifically to your business needs.
As they put it, their solutions are made to “consolidate balances for faster, easier access to capital when it’s needed”.
Best of all, you can manage your account online, which means that you can easily keep track of your finances and make payments from anywhere.
3. Lloyds Bank Business Banking
Lloyds Bank is another exceptional option, with various credit options available to help you manage your cash flow. You can choose from business credit cards; overdrafts; and loans, and you're able to do it all either online or in-branch.
Obviously, for businesses of any size, getting a sizeable cash injection can be a pivotal moment on the road to success. However, smaller businesses will be the ones who get the most utility out of credit loans, gaining a platform to access opportunities previously far beyond their budget.
Another great feature is their personalised support. You'll have access to a team of business managers who can provide guidance and advice on managing your finances, as well as access to business events and workshops.
Finally, they provide a range of tools and resources to help you manage your business current account effectively, such as cash flow forecasting; budgeting, invoicing, etc.
4. NatWest Business Banking
In their business investment accounts description, NatWest highlights their general commitment to helping businesses grow. They offer a range of resources to support businesses, including events, guides, and tools to help you manage your finances more effectively.
However, what makes NatWest really stand out from the crowd is how they give all those who sign up for an account access to FreeAgent, an accounting software that can help you keep track of your expenses, invoices, and cash flow in one place.
This lets you monitor your business's finances and make informed decisions based on real-time data.
Moreover, it offers automated bank feeds which automatically import all your business transactions into the software to save you time and reduce the risk of errors.
In addition to these features, FreeAgent also offers a range of tools to help you manage your expenses, track your time, and create reports. You can also use the software to file your VAT returns directly with HMRC.
All in all, NatWest offers one of the best business savings accounts available at the moment, so consider taking a look at their website for more details.
High-Yield Savings Accounts for Businesses
As a business owner, you're always looking for ways to maximise profits and make your money work harder. One option that may be worth considering is a high-yield savings account.
In this section, we'll explore what high-yield savings accounts are and how they work, the advantages of using them for businesses, and compare some of the best high-yield savings accounts available for businesses.
What are High-Yield Savings Accounts & How Do They Work?
These are a type of savings account that generally offer higher interest rates than traditional savings accounts.
The interest rate on these accounts is typically variable, meaning it can go up or down depending on market conditions. However, it is still mostly always higher than what you would earn on a standard business savings account.
High-yield savings accounts work in much the same way as traditional savings accounts. You deposit money into the account, and the bank pays you interest on that money. The difference is that with a high-yield savings account, you'll earn a higher interest rate, which means your money will grow even faster.
Benefits
Let's take a look at some of the most significant advantages you can expect from using these accounts:
Higher Interest Rates
As mentioned above, the main benefit of a high-yield savings account is the higher interest rate. This means your money will grow faster, which can hopefully help you achieve your financial goals more promptly.
Protected by The Financial Services Compensation Scheme (FSCS)
While it's unlikely that the bank holding your savings account goes bankrupt, the FSCS will provide protection by reimbursing you for up to £85,000 per person, per institution.
Naturally, this can offer some solace to business owners, knowing that your hard-earned money is secure and protected from any unforeseen circumstances.
Easy Access to Funds
Unlike other investment types like stocks or bonds, you can easily access the money in your savings account whenever you need it. This makes it an ideal place to store your emergency fund or other short-term savings.
Limited Fees
Many (but not all) high-yield savings accounts don't have any fees or minimum balance requirements. This lets you earn interest on your money without worrying about any extra costs.
Comparison of The Top High-Yield Savings Accounts for Businesses
Now that you know the benefits of using a high-yield savings account, let's take a look at some of the top options available to UK-based businesses:
5. Aldermore Business Savings Account
With a competitive variable interest rate of up to 2.5% AER, this account provides one of the highest rates available on the market. This makes it an ideal choice for businesses looking to earn the most interest possible on their surplus funds.
Aldermore Bank is well-regarded for its customer service also, so businesses can rest assured that they'll receive excellent support if they encounter any issues.
6. Metro Bank Business Instant Access Account
These instant access accounts offer a variable interest rate of up to 0.70% AER, along with no fees or minimum balance requirements. You can manage your account online, in person at a branch, or over the phone.
Metro Bank offers consistent returns for investors, but at 0.70% AER, there are probably better options out there.
7. RCi Bank Business Savings Account
If you're looking for fixed-rate accounts, this bank provides businesses with a staggering rate of 3.70% AER for a 1-year term.
But be wary, while you can withdraw money at any time with certain investments, you won't be able to access your capital with RCi Bank until the end of the fixed term.
8. Paragon Bank Business Easy Access Account
With variable interest rates of up to 2% AER, these easy-access accounts from Paragon Bank may not be the most profitable. Still, they remain a good option for businesses that value accessibility and flexibility.
It's important to note that these interest rates are accurate as of the time of writing, but they may change in the future. Be sure to check with each bank to confirm their current rates and any other terms and conditions.
Money Market Accounts for Businesses
Money market accounts are for investing in debt securities close to their expiry date, such as treasury bills; commercial paper; and certificates of deposit. This makes them fairly unique, as they don't invest in stocks or bonds like other kinds of investment.
These accounts are considered low-risk, low-return investments that are ideal for businesses looking to park their excess cash reserves in a safe and liquid investment vehicle.
Benefits
Liquidity
As mentioned, these are highly liquid which means businesses can easily access their funds if they need to. Additionally, you can withdraw money from the account quickly without any significant penalties or fees.
Stability
Money market accounts invest in short-term securities, which have a maturity of 1 year or less. As a result, they are less sensitive to interest rate fluctuations and market volatility than longer-term investments.
This makes them an excellent option for businesses that want to maintain the stability of their cash reserves.
Diversification
As these accounts invest in a diversified portfolio of short-term debt securities, the risk is spread across multiple issuers and types of debt. This massively helps in minimising the risk of loss due to defaults or downgrades by a single issuer.
Competitive Returns
While the returns on money market accounts may not be as high as other types of investments, they still offer a competitive rate of return. This is particularly true in a low-interest-rate environment, where the returns on savings accounts and other low-risk investments are very low.
Best Money Market Account Options
Let's take a closer look at some of the best deals offered by a couple of different banks.
9. HSBC Business Money Market Account
With HSBC's call deposit and notice deposit accounts, the AER is currently 0.05%. However, if you opt for a fixed-term account, you can earn a higher rate of 0.1% AER.
While a fixed-term account may not be suitable for every business, it can be a great option if you have a large amount of cash that you don't need immediate access to.
10. Lloyds Bank Business Money Market Call Account
With this account from Lloyds Bank, you'll enjoy competitive interest rates that are tiered based on your balance, meaning the more you save, the higher your interest rate will be. Plus, you'll have the flexibility to make withdrawals when you need to without penalty, making it a convenient option for businesses that need access to their cash reserves on short notice.
It's worth noting though that there is a £10,000 minimum deposit, so ensure you've got spare capital if you choose to go with this option.
Conclusion
It's time to wrap things up with a summary of the key takeaways and some final recommendations.
To begin with, we have seen that there are different types of investment accounts, so it's vital to choose the one that suits your business needs the most. We've gone over traditional savings accounts; money market accounts; and high-yield savings accounts, so hopefully you find an option that resonates with you.
In addition, we covered the necessary steps to take when opening an investment account, such as assessing fees, interest rates, and customer support, as well as considering the online tools provided by the account provider.
By taking these factors into account, we have recommended three top picks for the best business investment accounts in the UK:
- NatWest for a traditional investment account
- RCI Bank for a fixed rate high-yield account
- Lloyds Bank for money market accounts
Whether you are a new start-up or an established company, investing your money wisely can generate significant returns and provide a solid financial foundation for the future.
Just remember to only invest capital when it's conducive to the success of your business, and stay disciplined with risk management.
Thanks for reading, and we wish you all the best in your business endeavours!
