Understanding how various financial account types can facilitate business operations is essential to secure daily transactions and long-term company economic development.
Two critical financial instruments to contemplate are a business current account and a business fixed deposit. However, many business owners often confuse the two.
With that, discover several reasons why business owners in Singapore must obtain both and learn how they can aid when securing financial flexibility and security.
5 Reasons Why a Business Current Account and a Fixed Deposit Matter
1. Efficient Cash Flow Management with a Business Current Account
A business current account is essential for managing your company’s daily operations. This type of account allows for unlimited transactions, providing the flexibility to handle regular expenses such as supplier payments, employee wages, and operational costs. With a business current account, you can easily track your cash flow, ensuring that your business stays on top of its financial commitments.
Additionally, having a business current account makes applying for a business loan in Singapore much easier. Many financial institutions require businesses to have a current account as part of their loan application process. This requirement is because the account provides a clear financial record that can help lenders assess your business’ financial health. Moreover, a business current account can help you avoid overdraft fees or interest, as it allows you to manage your cash flow more effectively, especially when dealing with large payments or unpredictable expenses.
2. Earning Interest with a Business Fixed Deposit
A business current account is surely necessary for daily transactions, yet it’s not helping your money grow. This instance is where a business fixed deposit comes in. A business fixed deposit allows you to lock in funds for a while at a higher interest rate than a typical savings account. This account can be a financially sound way to grow your business’ surplus funds while keeping them relatively safe.
A fixed deposit ensures that company money is not left idle. Instead, it earns interest over time, which can benefit future business expansions and investments or as a safety net for unexpected costs. Additionally, by diversifying your accounts, you can separate your operating expenses from your long-term savings, reducing the temptation to dip into your reserves unnecessarily.
3. Financial Flexibility for Expansion and Investment
Combining a business current account and a fixed deposit gives your business the financial flexibility to manage short-term needs while planning for long-term goals. For instance, if you are considering applying for a business loan, having a fixed deposit can improve your credibility with lenders. A fixed deposit can also be used as collateral, lowering the interest rates and securing more favourable terms for the loan.
Businesses looking to invest in property or expand their operations will find this approach advantageous. With the security of a business fixed deposit, you’ll be in a stronger position to negotiate better deals on business loans, ensuring you get the financial support needed to grow your company.
4. Lower Risk and Greater Security for Your Funds
A business fixed deposit offers greater security for your funds than keeping them in a current account. Since the funds in a fixed deposit are secured for a specified period, they are less vulnerable to the fluctuations of daily financial operations. This stability can be critical when maintaining a solid financial foundation for your business.
While a business current account provides the necessary liquidity, a fixed deposit ensures that part of your money is safe and steadily earning interest. This account reduces the risk of mismanaging your funds or using them impulsively, which could otherwise hinder your long-term financial planning.
5. Simplified Loan Applications and Better Interest Rates
You’re in a better position to apply for a business loan when you have both a current account and a fixed deposit. Financial institutions often look for companies that demonstrate good fund management, and having both types of accounts can serve as proof of this. Additionally, lenders may offer more competitive business property loan interest rates when they see that you have stable financial reserves in a fixed deposit.
This strategic use of accounts makes loan applications smoother and allows you to negotiate better loan terms. Whether you need a business loan for expansion, property investment, or operational costs, having both accounts demonstrates that your business is financially sound and capable of managing loan repayments.
Conclusion
A business current account and a business fixed deposit are vital components in overseeing your enterprise’s financial well-being. The current account facilitates smooth cash flow for everyday transactions, while the fixed deposit offers stability and potential growth. When used together, these accounts provide the flexibility to address immediate requirements and long-term financial objectives. Integrating both types of accounts into your fund strategy is essential to enhance your business’ financial management, which can lead to improved loan conditions and a robust cash flow.
Visit RHB Bank to give your business the financial foundation it needs to thrive!
