Cash stockpiling SMEs urged to maximise their money
British businesses are building up their cash reserves, driven by the perceived need for greater ‘cash buffers’ (59%) and concerns about the volatility of the economy (26%), according to new research from specialist challenger bank Hampshire Trust Bank. Yet the bank warns that many SMEs are missing out on the means to improve day-to-day cash flow, or fund growth, by shying away from savings.
Many of the small businesses were apprehensive about ‘tying up’ their money in savings – just a quarter (25%) felt confident to put cash away for more than a year. Yet when asked about how they would use returns from savings if they received them, 38% said a savings return would be spent on running costs such as fuel or utilities, 33% would invest in improving business infrastructure and 19% would use the money for investment in plant and machinery.
The average SME current account balance is more than £230k – rising from £44k for those with less than 10 employees to more than £420k for those with more than 100 employees. According to the research, on average, for every £1 in a current account that a British business holds, there is another £1.17 in a savings account.
Stuart Hulme, head of savings at Hampshire Trust Bank, said: “For cash rich businesses there is a huge opportunity to maximise their money and make more out of every £1 they are earning. That is why we recently launched our new suite of business savings products. The benefit of making use of these savings accounts is not only the interest rate return you get as a business, but also the knowledge that the money you are depositing is being lent on to businesses looking to grow, delivering double value and supporting the growth of the UK economy.
“Those who are holding cash in their current account because they don’t want to tie it up should be reassured that there are accounts out there which provide both good rates of return and a wide range of terms.”
According to the research, the need for cash changes as businesses grow – while the primary purpose for current account cash is providing working capital (51%), many are keeping money to hand to invest in their business in the future (42%).