Why a Business CD Could Be Right for You

You work hard to grow your business and revenue. But is your money working hard for you? Saving in a business certificate of deposit is one way it can.

What is a business CD?

A business certificate of deposit, or business CD, is a type of savings account that banks and other financial institutions offer to companies. Business CDs are very similar to personal CDs but may require higher minimum deposits. However, they may also earn more depending on the institution’s business CD rates.

In addition, the interest rates paid for CDs is typically higher than traditional savings accounts. In exchange for the higher rate, you agree to leave your money on deposit for a set time. This period can be as little as seven days or up to five years or more. If you take money from the account before the maturity date, however, it will be subject to an early withdrawal penalty.  

At the end of the term, called the “maturity date,” you’ll have unrestricted access to withdraw your money plus interest earned. You can also renew the business CD or roll it into another CD at the same financial institution.

Business CDs offer considerable benefits.

When you’ll need the money and how you’ll use it are considerations when you’re thinking of opening a business CD. Whether you're saving to buy new equipment in three months or want to invest for the long term, they’re a smart way to save. Business CDs offer many unique benefits that will help decide if they’re right for you.

• Predictable returns

  Financial markets can be volatile, and many investments have unpredictable returns. With business CDs, you’ll know exactly how much earnings will be. Fixed-rate certificates of deposit feature a set interest rate for the entire term. Variable-rate CD returns are tied to leading indicators, such as the Prime Rate or Treasury bill yields. They perform well when interest rates are expected to rise.
  
  “Bump-up” and “Step-up” CDs also allow account holders to take advantage of higher interest rates. Financial institutions may use the terms interchangeably. Usually, you can request an interest rate change or “bump up” once if the financial institution offers the same product with higher earnings. You’ll be paid the higher rate for the remainder of the CD’s term. Step-up CDs feature automatic, pre-scheduled interest rate increases.
  
  Unlike variable-rate CDs, interest paid on bump-up and step-up CDs doesn’t fluctuate with the market – so interest rates don’t go down. Check with the issuing financial institution to confirm the type of product offered, terms and interest rate schedule.

• Higher interest rates than traditional savings and money market accounts

  Business savings accounts pay interest on deposits. However, the annual percentage yield (APY) on a business CD is generally higher because your funds remain invested until the maturity date.
  
  Business CDs typically offer better interest rates, with a much lower minimum invest-ment amount, than business money market accounts. The rate you earn remains the same regardless of the amount you put into the certificate, provided you meet the minimum. In contrast, many money markets have tiered rates where only the highest amounts on deposit earn the best return.

• Low risk

  Business CDs are insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the U.S. government. This means that even if the bank holding your CD closes, the federal government will reimburse you up to $250,000 per account holder.1
  
  When you invest in stocks, cryptocurrencies, startup ventures or real estate, you risk the investments losing value. In some cases, you could lose all the money you've invested. Business CDs are also lower risk than traditional debt instruments traded in the markets, like corporate bonds, but offer timely interest payments consistent with the original terms.

• Attractive promotional rates

  Financial institutions frequently offer promotional rates for new customers. These special-rate business CDs often provide higher returns for new deposits with earlier maturity dates.

• Flexible CD laddering options

  CD laddering involves purchasing multiple business CDs with staggered maturities. When the first matures, you can keep the proceeds or reinvest in another. The same applies to the next CD and so on. You’ll have reliable cash flow and be ready to take advantage of higher rates as desired.

Decide if a business CD is right for you.

You have many savings options to consider. Check your financial institution’s offerings and be sure you fully understand terms and conditions. These questions will help with your decision:

• What is the CD's interest rate and maturity date?
• What is the minimum deposit required?
• Is the interest rate fixed or variable?
• How often will interest be credited to your account?
• How much is the early withdrawal penalty?

A business certificate of deposit is a low-risk way to increase returns while saving for short- or long-term needs. To learn more about our rates and terms, call 1-888-SYNOVUS (1-888-796-6887) or stop by one of our local branches.