Thousands of small companies are missing out on millions of pounds in savings interest, according to a new study by Aldermore Bank.
The research, which is featured in the infographic below, suggests SMEs are failing to utilise business savings accounts, with many not gaining the valuable interest rates they’re entitled to. In fact, with cash held by SMEs totalling £152m, these businesses are missing out on substantial interest.
Although the findings revealed that 20% of small businesses do not have any savings, of those companies that do have surplus funds, 24% simply do not know how much interest they’re receiving.
Where do SMEs keep their surplus funds?
According to Aldermore’s research, 41% of companies are holding their surplus funds in business current accounts. By failing to place their money in accounts designed to reward savers, these companies are missing out on interest that could be used to finance further business opportunities.
The research also found that many SMEs are failing to shop around for the best deal. Although 35% of those organisations questioned do keep their money in business savings accounts, 91% of these companies hold savings with their current account provider. This suggests that many SMEs prioritise convenience over interest rates when looking for somewhere to store their money.
How much interest do SMEs get?
On average, small businesses are receiving just 0.6% on their surplus funds. However, 51% receive between 0 and 0.5%. These low figures could partially be attributed to SMEs’ lack of knowledge surrounding savings as, although a quarter of small businesses admit they are aware their savings generate no interest, 24% don’t know what interest rate they receive.
How do SMEs manage their funds?
The findings show that 11% of SMEs never review their accounts, while 22% check theirs less than once a year. In contrast, 24% assess savings annually, while 12% examine accounts every six months.
Comparing interest rates will result in companies finding the best deals to make the most of excess funds. SMEs that are able to lock their money away for a set period of time could benefit from higher interest rates by using a fixed rate savings account. However, companies which require regular access to funds may benefit from an easy access account, allowing them to make frequent deposits and withdrawals, while still taking advantage of competitive interest rates.
Given the pressures businesses are facing, it’s understandable that finding time to organise savings accounts can be difficult. As a result, Aldermore Bank has developed the SME Rate Checker, a tool offering small businesses the opportunity to find out how much interest they could earn during a 12-month period.
Aldermore’s Managing Director of Savings, Simon Healy, said: “It is clear many SMEs are not getting the most out of their surplus funds.
“To those businesses who don’t know their rates or who don’t shop around, I urge them to take just a few minutes to take a look.”
Aldermore Bank is a modern, legacy-free bank which challenges the established view of what banking should be. They deliver award-winning commercial finance, mortgages and savings to Britain’s small and medium-sized enterprises (SMEs), homeowners and savers.
Find Aldermore Bank on Twitter: @AldermoreBank