Business Certificates Of Deposit Accounts May Assist A Business' Cash Situation
Small businesses often feel the pain of a cash flow crunch. New businesses find it takes time to build up a decent number of customers in order to draw in consistent revenue. This is common and expected among all industries and market sectors. Established businesses, in general, maintain consistent levels of cash flow provide market conditions do not take an unfortunate and unexpected tumble. A series of problems can arise when a business discovers consistent cash flow becomes less consistent. One way to partially address the problem is to take advantage of safe investment strategies available through business banking services.
Business Investment Plans
Checking accounts and credit cards can be opened in the name of a business. Proprietors frequently write checks and accept checks in their businesses' names to make certain financial activities easier. What many entrepreneurs do not realize is the business could also direct funds to investment accounts. Doing so allows the business to accrue interest that can then be employed to cover certain expenses when cash flow weakens.
A certificate of deposit reflects one example of a low-risk interest endeavor. Granted, the interest rates on CDs are not very high. This is the tradeoff when looking for low-risk investment. Still, putting $10,000 into a 3-year CD at 1.9% interest could help a business offset certain cash issues. At the end of the three years, the $10,000 turns into about $10,581. $581 might not seem like a lot, but the amount may still grow when used right.
Buying with the Interest
A small business owner could direct the $580 to pay half a portion of a month's rent, which is an "okay" plan but there may be better ones. The $580 could be used for an expanded online local search engine optimization strategy. The new marketing push could effectively bring in new customers and revenue. Another strategy would be to look at a top-selling product and use the $580 to cover the costs of acquiring the product. The product would, in essence, be purchased "for free" and the profits build on the interest-based gains.
A Thoughtful Plan
Using interest to pay for business-related costs requites carefully planning. A 3-year CD needs all those 36 months to accrue interest. So, putting money into a CD at the last minute to cover an emergency plan is not workable. A better plan is to look for the best business banking institutions offering great interest rates to maximize gains.