New research has revealed that small companies could be making much more out of business banking, as owners remain clueless about the interest rates available on the lending market.
A study from new challenger bank Cambridge & Counties has found that too many small firms get a bum deal from their lender, and yet owners fail to shop around for higher interest rates.
Across Britain, small businesses could be earning as much as £473m more in interest a year, according to the research findings.
In total, small UK businesses hold roughly £69bn in deposit accounts, with around a third held in bank accounts paying 0.1 per cent or less in interest on balances up to £25,000, highlighting an opportunity for many company owners to be earning more from banking.
Cambridge & Counties Bank CEO, Mike Kirsopp, urged small business owners to shop around. “It’s all too easy to stick with the same old bank but small firms should make a New Year resolution to settle for more and take advantage of the higher rates out there,” she said.
“There is a significant spread of rates on the market so [owners] have a great opportunity to shop around to get a better return on their deposits.”
According to the study, interest rates available for business account balances of up to £25,000 in Britain has continued to decline since the Bank of England’s historic base rate cut last August.
The average rate at the start of 2017 is 0.41 per cent gross/AER – a figure that’s 38 per cent lower than this time last year.
Kirsopp went on to say: “[Small businesses] are missing out on literally hundreds of millions of pounds a year in interest. The latest figures also show deposits were up 3 per cent since the start of 2016, but too many firms are getting a raw deal.”
The Bank of England’s Monetary Policy Committee (MPC) lowered the UK’s base interest rate to an all-time low of 0.25 per cent last year, to sure up markets in response to the Brexit vote on 23 June.
Designed to ward off another recession, it was hoped the action would give a boost to small business, making bank borrowing more affordable whilst encouraging consumers to spend.
Challenger bank commits £1bn to business lending
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