Research by Recognise shows that almost half of SMEs leave their surplus cash in a business current account earning little or no interest
Challenger bank, Recognise Bank, has launched an Easy Access Savings Account for hard pressed small businesses. Recognise says SMEs could be missing out on hundreds of pounds in potential interest income by not using a business savings account, instead leaving their cash in business current accounts that don’t pay any interest.
Research* by Recognise Bank found that the average cash surplus balance among SMEs is £75,000. However, nearly half (49%) of the businesses surveyed left their cash surplus in a business current account – which usually pay no interest at all – while just under one in five SMEs (18%) used a business savings account offered by their main business bank account provider.
Traditionally, opening a business savings account with a provider other than that their main business bank has been a lengthy, time-consuming process for firms, hence many SMEs don’t bother to shop around for better interest rates because of the perceived hassle involved. Recognise Bank’s new business savings account has been created to be quick to open and simple to manage online, with unlimited withdrawals.
Because SMEs don’t tend to shop around for better rates, the banks that pay low interest rates have had their business customers – and their cash – over a barrel.
Announcing the new account, Bryce Glover, CEO of Recognise Bank, said: “Many of the big banks, who dominate the business banking sector, pay their business customers very low interest rates on business savings accounts. Because SMEs don’t tend to shop around for better rates, the banks that pay low interest rates have had 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. Business owners need to shop around for better rates on their business savings, which is why we have launched our new account.
“Not only are we offering a competitive interest rate and FSCS protection, we have also made our new business savings account quick to open and simple to manage, with no strings such as the requirement to have a business current account with us. We’ve made it straightforward for SMEs to access their cash immediately and earn a decent interest rate.”
Recognise Bank is one of the UK’s newest banks, entering the personal savings market in September 2021. It has now launched its first Business Easy Access Account, which is FSCS protected, doesn’t require the saver to have a current account with Recognise, can be opened and managed online via the Bank’s website, with dedicated telephone support if required.
Recognise Bank has designed its Easy Access business savings account to address the main barriers that SMEs say stop them from putting their money in a higher interest paying savings account with another provider: speed of opening, ease of management and security for their cash. Research by Recognise Bank found:
- 30% of SMEs said ease of management was most important when considering a business savings account
- 29% of firms said they would only save with a UK based provider
- 22% of SMEs wanted their savings accounts to be FSCS protected
- 21% wanted an account to be easy to open
When it comes to how SMEs use their cash surplus, Recognise Bank found:
- 30% keep their cash surplus as an emergency fund
- 29% use their cash surplus as a buffer in case of cashflow problems
- 23% use it for investing in their business
- 20% use it to pay regular bills
- 17% use it to pay suppliers and employees
- 16% use it to put towards future business expansion
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.”
Recognise Bank was created to provide SMEs with digitally enabled, relationship-led banking, offering a range of unregulated lending options via a network of relationship managers across the UK. The Bank recently hit a milestone of £100 million in lending and £95 million in deposits through its range of personal savings accounts.
*Research was carried out amongst the financial decision makers of 500 SMEs with between 1 and 49 employees by 3Gem in November 2021