Small companies prudent when it comes to banking their savings

New research from a leading UK bank suggests that the UK's small companies are still being prudent when it comes to saving for a rainy day.

Despite uncertain economic times, the new research released 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 4 in 10 (42%) to cover any unexpected equipment failure. In addition, 28% say that they may use their savings to cover late payments and 27% to fund business growth.

Despite being in the middle of a "credit crunch", the report suggests 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 with 46% only expecting to dip into their rainy day fund once or twice throughout the year.

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

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 www.interest-challenge.co.uk.

You should also read Bytestart's guide to choosing the best business deposit account.