From the time we open our first bank account, parents, guardians and even financial advisors always recommend keeping some money aside for the future. While that works well in our personal life, we don’t often manage to achieve the same level of savings while running our own business. Somewhere between errands, orders and delivery of goods or services, we start feeding into our profits and forget to set some money aside for the most important business goal that is- expansion.
In such a scenario, it is great to separate your personal funds from your business funds and you can do so with a business savings account. A business savings account is a bank account you can use to save earnings from your business for future business use. Additionally, any unexpected expenses or plans for larger purchases, means you might need extra cash. While it is convenient to borrow money or avail of a loan from a financial institution – that will incur interest. This means you need to pay back on a periodical basis irrespective of the state of your business. But with a business savings account, you don’t have to depend on a financial institution for a loan. You might be able to dip into savings from your business when you have a business savings account.
Still not convinced? Here are a few benefits of a business savings account that will help you change your mind.
Whether you are running a full fledged business or even a home business, it is always important to have liquid cash at hand. A business savings account allows you to keep liquid cash that can be used at any time, especially when you have an unexpected expense coming your way. This cash also gives you a cushion if your business isn’t doing very well. Additionally, liquid cash is the easiest way to make quick and convenient payments.
Like a regular savings account, a business savings account will also earn you interest on your savings. You can earn up to 1% interest on a business savings account – if you keep a large amount of money in your savings account or regularly add a percentage of your profits to your business savings account – even 1% of interest is a huge amount of money. Unlike a business current account, a business savings account will earn you daily accrued interest which will be deposited in your account at the end of the month.
Boost credit rating
When you have a good amount of money saved for your business’s future, you automatically improve your credit rating. In the future when you wish to expand your business, you will be easily eligible for a business loan because of your good credit score. A business savings account will increase the bank’s or financial institution’s confidence in your business’ ability to repay the loan.
Finally, a business savings account will inculcate the habit of saving for your business right from the beginning. So, it’s never a bad idea.