Small businesses save for a rainy day

As the economy continues to be as unpredictable as the British climate, new research by Alliance & Leicester Commercial Bank shows nearly half (45%) of small businesses have a rainy day fund set aside, so they are financially prepared, whatever the weather.

The research shows small businesses prefer to plan ahead, being prepared for every type of eventuality. Of those who have a rainy day fund set aside, over half (57%) expect to use this sum to cover any loss of business and more than four in ten (42%) to cover any unexpected equipment failure. In addition, almost three in ten (28%) say that they may use their savings to cover late payments and over a quarter (27%) to fund business growth.

In the current economic climate, it is good to see that nearly a quarter (23%) of small businesses actually save between £5,000 and £20,000 each year, with nearly three in ten (29%) saying that they never draw on this sum and more than four in ten (46%) only expecting to dip into their rainy day fund once or twice throughout the year.

Steve Jennings, Director of Business Banking at Alliance & Leicester Commercial Bank comments: "It is good to see that many business owners are regularly putting aside funds to protect their business against any unforeseen circumstances.

"From environmental disasters to an unexpected loss of business, a well-thought out contingency fund is an important business tool and can prove invaluable in helping a company to maintain control in a crisis."

The research identified two very different approaches to saving for a rainy day. Nearly a third (32%) of SMEs prefer to save money for contingencies on a routine basis, out of their regular month-end profits, while nearly four in ten (39%) simply make various payments throughout the year, depending on cash flow.

Steve Jennings adds: "With economic uncertainty, cash is even more critical for small businesses, therefore, it is important to shop around to ensure they are getting the best returns possible.

"By switching to a more competitive business deposit account, SMEs could see a significant increase in interest earned on their rainy day fund - money which could make all the difference between riding out the storm or sinking in debt, should a financial setback occur."

Recent research reveals small businesses are missing out on over half a billion pounds each year by not shopping around for the best business deposit account. To see how much extra interest your surplus funds could be earning, Alliance & Leicester Commercial Bank has launched interest-challenge.co.uk

For further information on the full range of deposit accounts available from Alliance & Leicester Commercial Bank, business owners should visit alliance-leicestercommercialbank.co.uk.