Much like with personal savings accounts, those of the business variety can generally be separated into two categories: variable accounts and fixed rate bonds. Keep in mind that there's nothing stopping you from having one (or more) of each type of account, as there is no limit to the number of business deposit accounts you can have.
Variable business savings
Variable rate accounts are typically easy access or notice varieties, and which one you choose will depend on your business needs. Easy access business savings accounts allow instant access to your funds in case of an emergency, whereas notice versions will require you to give notice to your provider before you can make a withdrawal, the trade-off being that you'll usually get a better interest rate – however, the key word here is 'variable', which means providers can change the rate on both of these account types at any time.
They each have their benefits – easy access savings accounts allow you to get your hands on any surplus cash instantly, and you'll generally be able to make as many deposits and withdrawals as you'd like, with most having low minimum balances and few withdrawal restrictions. They don't pay the most competitive rates, but for flexibility, they can't be beaten.
Business notice accounts, on the other hand, come with a few more restrictions, with notice periods typically varying from 30 days to 120. Some will allow you to access funds earlier, but there'll usually be a penalty, often in the form of reduced interest. That's why it's important to be truly organised with business notice accounts so you can give the notice period required, but for expenses such as tax bills – when you know the payment date and can plan your withdrawal accordingly – they could be ideal.
It's important to consider how much access your business might need to any saved funds before choosing an account, or you may want to split your deposits between several options to get the right mix of access and potential returns. You may even be focused on long-term growth and don't mind keeping a portion of business funds totally out of reach for a few years, in which case business bonds could be ideal.
Business fixed rate bonds
Business bonds work in much the same way as fixed rate accounts for personal use, in that you can choose between a variety of terms and secure different interest rates accordingly. Generally speaking, the longer you're willing to lock funds away for, the higher the interest rate you'll receive, but you'll need to make absolutely certain you won't need access to your business' funds for the duration of any fixed term.
Terms typically range from one to three years and its very rare that providers will allow you to make any withdrawals before the maturity. You generally won't be able to add funds to such accounts, either, which means they're only suitable for businesses that wish to lock a lump sum away.
The trade-off for this complete lack of flexibility is that the rates on business savings bonds tend to be far better than their variable rate counterparts, and the rate is guaranteed, too, so you know exactly what your return will be by the end of the term.
Still confused about the various savings terms? Try our savings guide hub.