Are you wondering if you should open a business savings account for your company? Running a successful business means being financially responsible by adhering to a budget.
To do so, you need a business bank account separate from your personal finances as well as a business savings account. In this article, we will share some of the key benefits that come with managing finances for your business with the help of a business savings account.
1. Protect Your Business In The Case of an Emergency
Just as you would in your personal life, a business savings account allows you to put away money to protect your business in the case of an unplanned event or emergency. By having a savings account as well as business insurance, you can feel more protected in the event of a natural disaster or perhaps just a slow season. This allows you to avoid shutting down when unexpected difficulties arise.
It’s important to have a business savings account as it will allow you an accessible way to retrieve your funds when needed. This is a great way to set aside money that is not tied up in other projects or investments. However, a business savings account can be a great place to save up for new projects or to save for a business expansion in the future.
This is also a great way to avoid business debt. These funds may also be used for growing your company in other ways, such as supplementing your marketing efforts so that you can expand your customer base and boost your profits.
2. Save Up for Tax Payments
When you’re busy running your business, it can often slip your mind to prepare for tax season. However, putting aside money for taxes is a must, and you can use your business savings account to do just that. You can ensure you have the funds to pay your taxes when the season rolls around. This also allows you to budget your tax payments into an account separate from your other business expenses.
3. Improve Credit Rating
Like a personal credit score, your business credit score is incredibly important when it comes to proving your credibility to lenders and banks. Luckily, you can grow your business credit score by keeping up an active business savings account. This will help when needing to secure a loan, as it is reassuring to banks that you are a credible company.
Having funds in your savings account shows banks that you have the money to pay off a loan over time. Lenders and financial institutions will review your bank accounts as well as your loan history when making decisions, making opening a business savings account a win-win.
4. Earn Interest and Stay Protected
Keeping funds in your business savings account can help you earn extra money in interest. This is helpful, as a business checking account will not earn interest. While the interest rate for business saving accounts is often low, it can still be a great way to build some substantive earnings over time.
Additionally, having a business savings account allows you to protect your funds. These accounts are protected by the bank as saving accounts are insured by the FDIC.
Also, having a business savings account can help to protect your company from over-drafting your checking account. While you want to avoid this, things happen. Having a business savings account can help you get access to funds you need to avoid facing high overdraft fees or missing important payments.
You can set up your business savings account to provide automatic overdraft prevention, meaning funds will automatically be drafted into your checking account to avoid an overdraft.
Additionally, your business likely uses some form of equipment to run your business processes successfully. Having a business saving account can be helpful if you need to repair or replace expensive equipment when you’re least expecting it. This will let you use your savings to replace the equipment so that your company can continue running smoothly and efficiently while continuing to bring in profits.
5. Add to Retirement Funds
Saving funds in a business savings account can help you prepare for retirement costs. The funds in this account can be used towards retirement expenses along with any other retirement plans you carry, such as an IRA. Saving in this account can help you if you decide to sell your business as well.
This makes selling more secure, as you never know how the market will be when you decide it’s time for you to sell. It may become difficult to find the right buyer or your business value may end up being less than you had expected. Your business savings account can allow you some funds to fall back on if the sale of your business didn’t go as planned.
The Benefits of Having a Business Savings Account
As you can see, there are tons of reasons entrepreneurs should have a business savings account. You can protect your business and your finances in the case of unexpected events. As a business owner, you likely already know there are many ups and downs, but having savings set aside is another planful way to make sure you can get through the tough times.
Are you interested in opening a business savings account with a trusted bank? Start with Signature Bank today.