Running a business means constantly making smart decisions about where your money goes and where it grows. If you’re looking for a safe place to park your cash reserves while still earning a solid return, a business certificate of deposit might be worth considering. It’s a simple, low-risk way to earn steady interest while keeping your funds protected. Let’s look at how a business CD works, when it makes sense to use one, and whether it’s the right move for your financial goals.
What Makes a Business Certificate of Deposit Different?
A certificate of deposit is a straightforward financial product. You lock money in an account for a set period in exchange for what is typically a higher interest rate than a standard savings account.
The question then becomes, can a business open a CD? Yes, it absolutely can. A business CD operates much like a personal one, but a few differences matter for companies. Business CDs often have higher minimum deposit requirements than personal CDs. They also come with flexible term options that can align with a company’s specific cash flow needs.
Overall, a business certificate of deposit account is not just for simple savings. It can form part of a larger cash management strategy. For instance, a small business in Springfield that wants to set aside funds for next year’s equipment purchase could find a 12-month CD to be a smart move. The interest earned provides a small boost to the dedicated funds.
How Does a Business Certificate of Deposit Work?
So how do businesses use CDs? The mechanics of a business certificate of deposit are simple. Your business commits a lump sum of money for a predetermined term, which can range from a few months to several years. During that term, the bank pays a fixed interest rate on your deposit. When the term concludes, the CD “matures,” and you can withdraw your principal plus the interest earned or roll it over into a new CD at the current rates.
Comparing CDs to Other Investment Options
When you evaluate where to place your company’s cash, it helps to compare a business CD with other common options like business savings accounts or money market accounts.
- Safety: One of the biggest advantages is security. Most CDs are FDIC-insured up to $250,000, which protects your funds from market volatility.
- Predictability: Because the return is fixed, you know exactly how much your money will earn over the term. This predictability helps with financial forecasting.
- Liquidity Tradeoff: The main difference from a regular savings account is liquidity. Your money is tied up for the entire term, and early withdrawals usually incur a penalty. Think of a CD as the financial equivalent of a slow cooker. Set it, forget it, and come back later to something that has grown.
What are the Benefits?
The benefits are clear for companies that can afford to set cash aside. You get reliable returns, which is great for planning ahead for major expenses like taxes or large equipment purchases. A business certificate of deposit also helps diversify where your company’s cash is stored, which adds another layer of financial stability. Many businesses use CDs to maximize returns on cash that is earmarked for a future project or not immediately needed for daily operations.
Get Started with a CD at New Valley Bank
At New Valley Bank & Trust, we make it simple to open a business CD account. Our team can help you explore the term options and rates that best fit your business strategy. With a minimum deposit of just $500 and no monthly maintenance fees, you can start earning a higher return on your savings right away.
Let your money work for you while you focus on your business. Contact our team to explore your options and see how a CD can fit into your financial plan.
