Business investing: how to grow your company’s cash

by InvestEngine

Business investing is an overlooked opportunity for a lot of small businesses. They are often sitting on surplus cash that’s earning little to no interest in the bank, while being eroded down by inflation.  

According to reports, there is as much as £150 billion sitting in SME current accounts that offer no interest at all, while a further £125 billion is in accounts that do offer interest, but offer smaller interest rates to smaller companies. 

Our Business Accounts offer a solution — they invest in the stock market, giving the opportunity for higher returns than a traditional savings account. 

Here, we’ll explain how business investing works, why it’s worthwhile and suggest some ways you can get started. 

How business investing works

Business investing works in much the same way as standard personal investing. You can take the spare cash in your business account and put it to work by investing it in financial markets. 

It’s important to note that this is not a savings account – it is an investment portfolio. The goal is to make full use of any spare business cash. We believe that any business with spare cash is missing an opportunity if they fail to explore investing. 

It’s also less complicated than you might think – you can have a portfolio funded and growing in a matter of days. 

Is the cash locked away?

The short answer is no. It’s a common misconception that long-term investing means locking your cash away for years, but this isn’t always the case. 

With an InvestEngine Business Account, your cash is easy access. Once you action  the withdrawal, you’ll typically have the money available in 4-5 business days. You don’t have to give us any notice and we charge absolutely no exit fees. 

What should you invest in?

A business’ choice of investments will depend a lot on its circumstances. These considerations are: 

  • How long you plan to invest for
  • The level of return you want to chase
  • How actively you want to manage the investments

Generally speaking, though, business owners will favour lower-risk, shorter-term investments because it’s difficult to predict when you might need to use some of the cash. 

ETFs are a great option for businesses. They’re relatively low risk, they offer easy diversification and they allow for hands-off investing over the short and long-term. We’ll go into what they are and why they’re great at the end of this article, but it’s an investment type that all businesses should consider. 

Alternatively, leave the investing to us. Our Managed portfolios charge just 0.25% a year, so you’re free to focus on the other important areas of your business. Find out more about Managed portfolios

Find bank beating returns with money markets

For a lot of businesses, investing reserve cash will be about beating the growth rates offered by their bank. Rather than simply allowing cash to be eroded by inflation, putting it to work in (relatively) low risk investments is often an easy decision. 

This is where money market ETFs can offer a simple, effective solution. A money market fund is a type of fund that invests in debt securities which carry short maturities and minimal credit risk with the objective of giving you a higher return than cash.

These funds are typically made up of short-term debt from governments, banks, and companies with strong balance sheets and investment-grade credit ratings. This means they offer more stable returns compared to other bond funds. 

Why consider these funds now?

Given their low risk, these types of funds can be a good place to park your business cash. A money market ETF allows businesses to earn interest until they decide to use the cash somewhere else. 

With interest rates likely to remain high for some time, these types of funds are becoming more popular and are, themselves, a substitute for a savings account. 

Currently, the Bank of England’s SONIA rate, which money market ETFs aim to track, is 5.19%*. 

*Variable annual rates are correct as of 27/11/2023.

What are ETFs and why are they useful?

An ETF is a type of fund that is traded on stock exchanges. Rather than investing in individual stocks, an ETF is a basket of securities that can contain hundreds or even thousands of companies. 

ETFs are made to track indexes. This means you can invest in an entire market – whether it’s the S&P 500 or a more thematic market like ‘energy’ – in a single transaction. 

Why we recommend ETFs

  • They’re low-cost. ETFs have some of the lowest investment costs around, so more of your company’s cash can be put to work. 
  • They’re varied. Invest in whatever industry, theme, geography or index you like. Whatever your area of focus, we have an ETF to cover it.
  • Zero stamp duty. Most share purchases in the UK are subject to 0.5% stamp duty. With ETFs, you pay nothing. 
  • They’re easily bought and sold. Your cash isn’t locked away when you invest in ETFs, so you can buy and sell freely. 

So, it’s time for businesses to take action and put their unused cash to work. Rather than letting cash reserves dwindle away due to inflation, give yours the chance to grow by investing in ETFs. 

Important information

Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.

This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.

Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.

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