Understanding which savings options are best for your business 

Owning a business comes with many decisions. Some are small, some are big, some are made on a daily basis, while others are made over the long term. One key decision that every business owner and entrepreneur makes is around the most effective way to save their cash.

It’s often the case that your business will utilize one or more types of business accounts, and choosing which ones make sense for you involves considering an account’s rate of return and your access to funds.

Below is a breakdown of some of the most common types of business accounts to help you decide which ones are right for you.

• Business savings account - Similar to a personal savings account, this account is designed to safely hold the cash your business brings in. Business savings accounts can:
• 1. Earn your interest over time
  2. Prepare and cover the costs of those unexpected expenses
  3. Serve as a helpful tool in deciding how to budget and manage your business expenses
  4. Prompt you to be more thoughtful about your business spending, as it typically takes a few more steps to access the cash than simply swiping a credit or debit card
  5. Furthermore, with business fraud on the rise, keeping your hard earned money in a lower transaction volume, lower access account, is a way to safeguard it.

• Business money market account - A type of savings account that offers some key differences, including: 
• 1. In some cases, easier access to your cash. Money market accounts usually give you the ability to write checks and use an ATM card, unlike a business savings account.
  2. A more competitive, higher yield, typically, in comparison to traditional savings accounts. It’s worth comparing rates between these types of accounts to decide which one works best for your savings needs.
  3. Higher minimum opening balance requirements, due to the higher interest rates available.

• Business certificate of deposit (CD) account - For your business’s extra savings you can afford to store it and grow for a long-term goal, a CD: 
• 1. Often offers a higher interest rate than a money market. 
  2. Has a fixed term, meaning your business won’t have access (without paying a withdrawal penalty) to the funds for an agreed-upon time frame, sometimes a few months or multiple years. 

• Sweep account - An option to maximize earnings on any excess cash balances, with minimal intervention from you.  Set a target daily balance in your checking account to meet your business’s operational needs. Any excess funds your business has, instead of sitting idle, will sweep automatically into an interest-bearing account, generating additional income. Funds are swept back into your checking to make sure your checking does not go below the target you set. Sweep accounts can also be used to reduce debt by paying down your line of credit balance. 

Each savings option comes with unique advantages for your business, so it’s critical to carefully consider how you save your extra cash. With all the challenges and big decisions that come with owning a business, Westfield Bank’s team is here to help you find a solution that works for you. We’re also proud to be a Member FDIC, allowing us to prioritize financial safety and protect your assets.